Monday, June 30, 2014

Saturday, June 28, 2014

Crash of the Global Currency Market and Insolvency of the U.S. Dollar


"Everything that was 'too big to fail' in 2008 is bigger and more dangerous today," says New York Times bestselling author James Rickards. Rickards predicts the crash of the global currency market and insolvency of the U.S. dollar in his latest book, The Death of Money: The Coming Collapse of the International Monetary System. "We're waiting for the catalyst that will cause this catastrophe to come tumbling down."

Reason Managing Editor Katherine Mangu-Ward sat down with Rickards to discuss the future of money and a return to the financial stability of the gold standard in an event co-hosted by the Charles Koch Institute.


- Source, Reason TV


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Thursday, June 26, 2014

Ugly Financial Crisis to Jolt US Within 5 Years


A financial catastrophe worse than that of 2008 will hit us within five years, says James Rickards, best-selling author and senior managing director at Tangent Capital Partners.

"The meltdown in 2008 was not a meltdown. It was sort of a half-meltdown," he told Dennis Kneale of Newsmax TV in an exclusive interview.

While Lehman Brothers was the only major financial institution to completely collapse, others were close to it, said Rickards, author of "The Death of Money: The Coming Collapse of the International Monetary System."

But the Federal Reserve stepped in to prevent financial firms from going under. As a result, "the Fed truncated" the avalanche, he explained.

"Think of it as a bunch of dominoes falling. All the dominoes are going to fall, but if I drop a steel curtain between two dominoes, that's going to stop. That's what the Fed did."

Rickards believes "things should have been allowed to crash" in 2008. "All the banks should have been nationalized by the government, the stocks should have been wiped out, the bondholders should have taken a haircut and the clean banks should have been re-IPOed," he argued.

"That's hope and faith in the American people and entrepreneurship. That's what I advocate. The government doesn't believe in itself. So when you start to go down, but instead of hitting bottom, you truncate it and guess what, you're flat-lining forever," he asserted.

But the Fed's tactics didn't change the dynamics, Rickards maintained, as bad debt and leverage haven't gone away. "That's all still there. Except now, it's worse, because in 2008, what did we hear about? 'Too big to fail,' right? Well guess what, the five biggest banks in America today are bigger than they were in 2008," he insisted.

"So everything about '08 that was too big to fail is bigger today. Those dominoes are still waiting."

Meanwhile, the Fed has printed $4 trillion during the last six years. "So, they've got no more drive power," Rickards contended. Liquidity crises arise every five years, he said. "So what's going to happen when the next liquidity crisis comes?"

It won't be pretty. "The next time it happens, it's going to be bigger than the Fed, that's why they're not going to be able to stop it," he predicted. The fact that the financial system is bigger than in 2008 will make this crisis worse, Rickards added.

"The depression of 1920 was as sharp and as hard as what happened in 1929 and 2008. But the government let it go and guess what? It was over in 18 months and we had 10 years of prosperity and Roaring Twenties," he said.

"But that actually is a very healthy process. But because we haven't allowed the system to heal in all these other crises, the next one is going to be so big that the outcome is likely to be money riots and social discord and then you'll see a neo-fascist response."

Rickards compared today's economy to the San Andreas Fault, because "underneath these forces are building up."

"We're in a depression — not a recession — a depression."

He warned that the deflationary forces from the depression and the inflationary forces from policy are pressing against each other.

"They're fighting each other to a standstill, but that's going to snap, that's exactly like two tectonic plates crashing into each other," Rickards declared. "It's going to be ugly for investors, it's just a matter of time."

As for the timing of the crash, "it could come tomorrow," he said. "I'm not predicting tomorrow, but three years seems like a long time for this, five years definitely a long time."

So what will cause the collapse?

"The correct answer, the scientific answer is it doesn't matter, and what I mean by that is, it's like the snowflake in the avalanche," Rickards explained.

"The snow's building up and it's building up, and you're looking at it. An expert can say, hey, it's unstable, it's going to fall down. So here comes a snowflake, it disturbs a few other snowflakes, it starts to slide, it starts to shoot, gains momentum and the whole thing comes tumbling down."

And what might be the first snowflake to move?

"It could be a failure to deliver physical gold," Rickards suggested. "Physical gold is disappearing, there's a mountain of paper gold. . . . So a failure to deliver could cause panic buying of gold."

Other possibilities include "an IMF-global type of failure, a prominent suicide, a natural disaster such as Fukushima," he said, referring to the March 2011 Japanese nuclear accident. "It could be a lot of things. . . . What's important is the rock that's already in the system."

For investors seeking to cope with the crisis, Rickards recommended a 10 to 20 percent exposure to gold — "10 percent for the conservative investor, 20 percent for the aggressive investor."

Meanwhile, corporations have record amounts of cash on their balance sheets. "That wealth is highly concentrated in a relatively small number of companies," he stated. "Apple, Google, IBM they've all got records amounts of cash."

But why do they have that cash? "This is what the IMF calls precautionary savings," he explained. The companies "build up the cash so when the next panic comes — and it will be coming — they know that they'll have to fund themselves internally for six months because the commercial paper market will go. So it's not a source of strength," he noted.

"They're not going to spend that cash or use that cash, they're holding it. . . . They're holding it because they're scared to death of liquidity evaporating. But it's not going to stop this global meltdown because that's much bigger than these corporations."

Rickards also warned that the United States isn't doing enough to thwart the "financial warfare going on behind the scenes, some of it obvious, some of it behind the scenes."

He believes the "greatest single threat" to the nation is "cyber financial warfare, the combination of a financial attack done in cyberspace."

"Everything the United States is doing is making the situation worse. China's on the attack, Russia's on the attack, Saudi Arabia will soon be on the attack," he stressed.

When it comes to the banking system, "we should break up the big banks. JPMorgan should be five separate banks. That way one of them goes down, too bad, but it didn't take down the system," Rickards claimed.

"We're actually enabling the banks to get bigger, we don't understand the fiscal properties at risk. Everything about what the U.S. is doing from a policy perspective is moving in the wrong direction."


- Source, Money News


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Tuesday, June 24, 2014

James Rickards Talks to Melike Ayan on Death of Money, FED


Jim Rickards appears on TV where he discusses he second best selling book. The Death of Money. He sees a US dollar crash coming and the only safe have is gold.

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Sunday, June 22, 2014

When This Bubble Pops it is Going to End Very Badly

I actually had breakfast with some of the leading private equity investors and CEOs this morning and, you know, privately they'll say, look, the bank covenants are gone, cost of funds is very close to zero, they've got more leverage than they've ever had, the U.S. inner stock exchange has greater leverage than they've ever had, so it looks good but this is a bubble being supported by zero interest rates, high leverage.

We all know what happens, they will collapse sooner than later.

You know, stocks could actually be higher by the end of the year, based on, I expect, the Federal pause, the taper around the middle of the year. But in the long...this is a bubble. The problem is bubbles, they last longer than we think, but when they pop, it ends very badly. This is all being floated by zero interest rates and leverage.


- Source, James Rickards via FXStreet


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Friday, June 20, 2014

The Death of Money with Jim Rickards


The International Monetary Fund trimmed its outlook for global economic growth in 2014. But the one place not engulfed by this gloomy outlook is the UK, which the IMF expects to grow by 2.9% in 2014. Erin brings you the details. Erin then sits down with economist and author Jim Rickards on his new book, "The Death of Money: The Coming Collapse of the International Monetary System." We ask Rickards about the threats to the US dollar in his book. It covers the IMF, emerging markets, and the Fed, among other things. Don't miss it. For today's Big Deal, Edward Harrison and Erin discuss how Apple, Google and other big tech companies allegedly fixed the high tech labor market.

- Source, Russia Today


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Wednesday, June 18, 2014

Janet Yellen’s Fed Playbook

The U.S. Federal Reserve is opaque at the best of times. Even their jargon-filled efforts at transparency, called “forward guidance,” only add to the confusion about their intentions regarding monetary policy. Yet there are times when careful study of personalities and public statements combined with a good working knowledge of Fed models and methods can yield important clues about their future course of action. This is one of those times.

Since 2008, the Fed has been engaged on a stop-and-go basis in a program of money printing known as quantitative easing or “QE.” The current round of money printing, called QE3, began in September 2012 and had been proceeding at a pace of $85 billion per month. In December 2013, the Fed started to reduce, or “taper” the printing The current pace is $45 billion per month and the market expects the taper to continue in stages until the money printing reaches zero late this year. But will it?

The Fed has said repeatedly that the taper is data dependent and not on a pre-set course. The pertinent data for this purpose involves economic growth, unemployment, inflation and related indicators. The taper began on what seemed like a wave of good news with strong growth and declining unemployment. But that growth proved ephemeral, and disappeared completely in the first quarter of 2014. The declining unemployment rate proved meaningless because it was driven by dropouts from the labor force as much as job creation. Recent data has continued the bad news with a fall in consumer confidence, weak retail sales, and weak industrial production. In short, the case for tapering is weak and the case for a pause in the taper is strong.

The Fed’s remaining policy meetings this year are in June, July, September, October, and December. The Fed will not pause in June because the April employment numbers were superficially strong and even a bad report for May will not be enough to throw the Fed off course. If the Fed does not taper in July, they will no doubt stay the course and finish the taper by December. So, July becomes the pivot for Fed policy in 2014. If they pause, it will be in July; if they don’t pause in July, they won’t pause at all. How can we handicap the July move?

Ironically, Yellen’s own instincts lean toward pause. The Fed has a dual mandate of price stability and reducing unemployment, which Yellen takes to heart. She is heavily influenced by labor economist Andrew Levin who believes that unemployment is cyclical rather than structural in nature. Levin also says that those who have dropped out of the labor force need more stimulus to get jobs than those who are merely unemployed.

Combining these factors reveals that Yellen is determined to reduce unemployment, believes she has the monetary tools to do so, and believes she must print extraordinary amounts to overcome the inertial effect of low labor force participation. This is a recipe for a pause, and later a return to increased money printing.

A countervailing factor is that Bernanke tied Yellen’s hands by starting the taper in December before she was in charge. It’s politically difficult for a new chairwoman to rock the boat so early in her tenure.

This is where personalities matter. Fed Chairwoman Janet Yellen is not a dictator. She must develop consensus on the Federal Open Market Committee, or FOMC, the group that makes policy. The FOMC usually consists of eleven members made up of seven Fed governors and four regional reserve bank presidents who rotate in the position. Historically, the reserve bank presidents are more hawkish than the Fed governors, meaning they generally support the taper and oppose a pause.

Right now, there are 3 vacancies on the Board of Governors, which means the FOMC only has 8 members divided equally between governors and regional presidents. Two of the regional presidents, Charles Plosser and Richard Fisher, are super-hawks. As a result of the vacancies and the rotation, the current FOMC is quite hawkish. So the bar for a pause is high. What would it take to cause the Fed to pause in July?

Basically bad data would have to run the table. If we see a combination of weak employment reports for May and June, disinflation or outright deflation, sharply declining labor force participation, and preliminary signs that second quarter GDP will be much weaker than consensus expectations, then the Fed will pause in July. But if any of these data points come in strong, the taper will continue in July and beyond. The key data will be available by early July in advance of the July 30 announcement by the FOMC.

With or without a pause in July, change is on the way. President Obama has nominated two new governors, Stan Fischer and Lael Brainard, to fill the board vacancies. Both are likely to be dovish and amenable to Yellen’s wishes. The two hawks, Fisher and Plosser, will rotate off the board in 2015 to be replaced by two doves, Charles Evans and Dennis Lockhart. In short, a dovish FOMC is in the cards for 2015.

The showdown comes in July. If the data between now and then are uniformly bad, the Fed will pause and then increase money printing in 2015. If the data are mixed, the Fed will finish the taper this year. But this does not alter the fact that the fundamental economy is weak and the taper is exacerbating the weakness. If the Fed does not pause in July, they will revert to money printing in 2015 to offset the weakness. Either way, look for QE4 in 2015.

If the Fed pauses in July, look for stocks and gold to rally strongly in the second half as it becomes clear that the Fed can never stop printing. But, if the Fed finishes the taper, looks for stocks to go lower in 2014 with high volatility as the taper does its damage. Gold may find some strength in spite of the taper due to buying by India, China, Russia and Iran as the geopolitical situation continues to deteriorate for the U.S. dollar. When QE4 is launched in 2015, gold will get a second wind and stocks will rally in tandem. By then it will be clear to all that Fed money printing has passed the point of no return.


- Source, James Rickards via Darien Times


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Monday, June 16, 2014

Jim Rickards Full, In-Depth World Bank Presentation On The Future Of Money



“Again, let’s give the Russians credit – chess is their national sport – and I think Putin has thought this through. One of my concerns is that the White House has not thought it through. There’s a lot of bold talk coming from Capitol Hill and certainly a desire to impose costs on the Russians…Since when do you take territory for free? You know, there’s always costs. It costs money to build an aircraft carrier, it costs money to build a jet plane, and it costs money to wage financial warfare. Of course there are costs – that’s not going to deter someone. Putin is not a wealth maximizer, he’s a power maximizer.”

Jim Rickards is a counselor, investment banker and risk manager with over thirty years’ experience in capital markets. He is currently Senior Managing Director at Tangent Capital Partners LLC, a merchant bank based in New York City, and is Senior Managing Director for Market Intelligence at Omnis, Inc., a technical, professional and scientific consulting firm located in McLean, VA. He advises the Department of Defense, the U.S. intelligence community, and major hedge funds on global finance, and served as a facilitator of the first ever financial war games conducted by the Pentagon. A frequent guest on financial news programs, Rickards is also the author of Currency Wars: The Making of the Next Global Crisis and The Death of Money


- Source, Gold Silver


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Saturday, June 14, 2014

Governments Manipulate Currencies Globally

By Casey Research


"Currencies are in effect the ocean" that all the fish, including the great white shark, fear, says investment manager and author of Currency Wars, James Rickards. Sometimes the ocean is calm, but in times like ours it becomes a much more hostile and dangerous environment. Find out how currencies interact globally and why governments manipulate them so much, in this video.





Listen to James' entire presentation at the latest Casey Research Summit – and those of 30 other well-known economists, authors, and investment pros – on CD or MP3. Learn more.


The article James Rickards: Currency Wars – The Making of the Next Global Crisis was originally published at caseyresearch.com

Thursday, June 12, 2014

Financial Collapse and Massive Shortages in Gold Coming

Financial expert and best-selling author James Rickards’ latest book predicts “the coming collapse of the international monetary system.” One of the sign posts is countries like Russia declaring it will shed the U.S. Dollar as reserve currency in international trade. Rickards explains, “Putin said he envisions a Eurasian economic zone involving Eastern Europe, central Asia and Russia. The Russian Ruble is nowhere near ready to be a global reserve currency, but it could be a regional reserve currency.”

Rickards’ latest best-selling book, “The Death of Money,” was released in April. Even Rickards is surprised at how fast the economic situation is unfolding. Rickards says, “If you ask me what has happened since you finished writing the book that comes as a surprise, I would say a lot of the things I talk about in my book are happening faster than I would have expected. Things that I thought would happen in the 2015 or 2016 time frame seems to be happening now in some ways. If anything, the tempo of events is faster than expected. Therefore, some of these catastrophic outcomes may come sooner than I wrote about.”

Rickards goes on to say, “Right now, we are on the precipice now. When you are on the precipice, it doesn’t mean you fall off immediately, but you are going to fall off because you can see the forces in play. What I tell clients and investors is it’s not as if we are going to make some mistakes and some bad things are going to happen. The mistakes have already been made. The instability is already in the system. We’re just waiting for that catalyst that I call the snowflake that starts the avalanche. You don’t worry about the snowflakes; you worry about the snow and that it’s unstable and it’s just waiting to collapse. That’s what the system is right now; we are just waiting for a catalyst. People ask me all the time, what could it be? Technically, my answer is it doesn’t matter because it will be something. It could be a failure to deliver physical gold. It could be an MF Global financial failure. It could be a natural disaster. It could be a lot of things. The thing investors need to understand is the catalyst doesn’t matter. It’s coming because the instability is already there.”

On gold manipulation and when it will end, Rickards says, “It will end when the physical shortage gets to the point that someone fails to deliver; which, at that point, there will be a buying panic. There could be a buying panic or what some people call a demand shock. One of the things I said about gold manipulation is if I was the manipulator, I would be embarrassed at this point. The manipulation is obvious. The evidence is coming in from all directions. . . . The manipulation is clear. When will it end? It will end when there is a physical shortage that pops up somewhere, or it will end with a short squeeze.”

Rickards goes on to say, “We are going to get a very large demand shock coming from China and India. Let me explain those two cases. We have a brand new government in India, and they are going to repeal the import tax on gold. We also have the wedding season coming up. . . . So, India is set up for a very large surge in demand in the fourth quarter. Now, over to China, this is one of the things that it’s happening faster than I originally thought. The credit collapse story is happening in real time. I said (in my book) this might be a 2015 event, but it looks like it is happening now. Defaults are piling up. We are seeing money rise. We’re seeing people march down to the banks . . . trying to get their money back. . . . So, if they can’t buy foreign stocks, domestic stocks, don’t want to put their money in the bank and are getting out of real estate, then what’s left? The answer is gold. . . . I see a demand shock coming from China. . . . You could see a scramble to buy gold. It is going on anyway, but you could see it accelerate. That will take down the manipulation. Once the markets prevail over the manipulators, then watch out.”

Rickards says the collapse will happen, but he is not sure of when it will come. Rickards explains, “It is the thing you won’t see coming that will take the system down. Things happen much more quickly than what investors expect.” Rickards adds, “What will happen in gold is that it will chug along and then all of a sudden–boom. It will be up $100 an ounce, and then the next day it will be up another $200 an ounce. Then everyone will be on TV saying it’s a bubble—boom. It’s up $300 an ounce, and before you know it, it will be up $1,000 per ounce. Then people will say gee, I better get some gold, and they’ll find out they can’t get it because the big guy will get it. You know, like central banks and sovereign wealth funds will be able to get the gold. The typical investor will run down to the coin shop and they will be sold out, and the U.S. Mint will say sorry, we’re not shipping. You’re going to find out you can’t get it because the whole thing is set up for massive shortages in supply.”


- Source, USA Watchdog


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Tuesday, June 10, 2014

Catastrophic Outcomes May Come Faster Than Expected


James Rickards, author of the new best-selling book called "The Death of Money," says the financial collapse will happen, but he is not sure of when it will come. Rickards explains, "It is the thing you won't see coming that will take the system down. Things happen much more quickly than what investors expect." Rickards adds, "What will happen in gold is that it will chug along and then all of a sudden--boom. It will be up a $100 an ounce, and then the next day it will be up another $200 an ounce. Then everyone will be on TV saying it's a bubble—boom. It's up $300 an ounce and, before you know it, it will be up $1,000 per ounce. Then people will say gee, I better get some gold, and they'll find out they can't get it because the big guy will get it. You know, like central banks and sovereign wealth funds will be able to get the gold. The typical investor will run down to the coin shop and they will be sold out, and the U.S. Mint will say sorry we're not shipping. You're going to find out you can't get it because the whole thing is set up for massive shortages in supply."

- Source, USA Watchdog


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Monday, June 2, 2014

Rickards Predicts Collapse of Global Monetary System

The collapse of the monetary system awaits the world in the near future, says financial expert James Rickards. Russia and China's desire to rid the US dollar of its global reserve currency status is an early sign of the “increasingly inevitable” crisis.

“China has three trillion dollars, but they are buying gold as fast as they can. China worries that the US is going to devalue the dollar through inflation so they want to have a hedge if the dollar goes down, so the gold will go up,” Rickards told RT.

As one of the key events in support of his forecast, Rickards points to the words uttered by Russian President Vladimir Putin at the 18th International Economic Forum in St. Petersburg that took place earlier this month.

“Putin said he envisions a Eurasian economic zone involving Eastern Europe, Central Asia, and Russia. The Russian ruble is nowhere near ready to be a global reserve currency, but it could be a regional reserve currency,” he said, as quoted by ETF Daily News.

Rickards’ book about the demise of the dollar was released in April under quite an apocalyptic name – 'The Death of Money.' However, the author is surprised that the events are unfolding much faster than he predicted.

“If anything, the tempo of events is faster than expected. Therefore, some of these catastrophic outcomes may come sooner than I wrote about.”

Last Wednesday, China and Russia signed a historic US$400 billion gas deal which will provide the world's fastest growing economy with the natural gas it needs to keep pace for the next 30 years. Experts say this could be the catalyst that dethrones the greenback as the world's reserve currency.



The best-selling author writes that the “linchpin” of the collapse is the approaching failure of the dollar since it is at the foundation of the system. Powerful countries such as Russia, China, Iran, and India do not rely on the US in their national security and would benefit from the US economy being weaker, thus desiring to break free from the dollar standard.

He elaborates that the dual collapse “looks increasingly inevitable.”

“The mistakes have already been made. The instability is already in the system. We’re just waiting for that catalyst that I call the snowflake that starts the avalanche,” he said, as quoted by ETF.

There are three big international factors that are pressuring the dollar right now – Russia, China, and Saudi Arabia.

“Since the 1970s, Saudi Arabia [has been] the leader in what’s called the petrodollar. It basically means that Saudi Arabia and, by extension, OPEC, price oil in dollars, so the world market is in dollars.

“Russia is a major natural resource exporter; they price their exports in dollars as well. But Russia now is engaged in a financial war with the US around the issues in Crimea and Ukraine.”

The threats to the dollar are “ubiquitous,” the author states in his book. The only way the US can pay off its $17 trillion debt is with inflation, which would drive other countries away from the dollar while the accumulation of gold by Russia and China presages the shift to a new reserve asset.

“The next time we will have a liquidity crisis in the world it’s going to be bigger than the ability of central banks to deal with it. The IMF will basically have to bail out the world by printing the SDRs (an international reserve asset created by the IMF in 1969 to supplement its member countries' official reserves). By that time, you will see the SDR emerge as the new global world currency,” Rickards told RT.

- Source, Russia Today