Economics has its own language.
For those busy keeping the world humming or new to gold and economic goings on in the world – a quick 3 minute synopsis of a recent interview with Jim Rickards, author of Currency Wars, senior managing director at Omnis.
Fox Business News Interview
August 15, 2013
Another currency crisis is coming. Sooner rather than later.
The British Pound Sterling is in the eye of the storm because they have very little gold to back their currency, and Mark Carney, the current Governor of the Bank of England, is going to keep printing fiat money without the gold to back it.
If you’re a trader, as opposed to an investor, you should be shorting the British Pound. Jim’s favourite currency for the past two years has been the Euro. He also likes the Singapore dollar, Korean won and Canadian dollar. Jim used to like the Australian dollar but they joined the currency war and tried to trash their dollar so he’s “done with them”.
In the U.S. there are targets for unemployment but wiggle room to whether the Fed will keep printing fiat paper money until they reach the targets. The Bank of England has now said they will print money until they reach economic targets.
What if they keep printing and don’t reach the targets? Investors will lose confidence because the Bank of England does not have enough gold to back the money they are printing.
The European Union has 10,000 tonnes of gold and the U.S. has 8,000 tonnes of gold. Britain sold most of their gold. They have a printing press and no gold, so they are extremely vulnerable.
A global currency crisis is going to affect the whole world and the big winner is going to be gold.
You can see the banking crisis coming because in 2008 it was said that the banks were too big to fail, so the U.S. government bailed them out instead of letting them go bankrupt.
Since then the banks are bigger. The five largest banks have a higher concentration of total banking assets and their derivatives books are larger.
Everything from 2008 is bigger and more dangerous, so you can see a crisis coming.
The Fed printed 3 trillion dollars between 2008 – 2013 to patch over the 2008 crisis. What will they do next time? Print 6 trillion?
The Fed announced they might taper off printing fiat dollars depending on how the economic data looks. If they do taper then it could be temporarily bullish for the U.S. dollar and bearish for gold. Gold could go down to $1,000 per ounce if they go through with tapering off the Quantitative Easing (QE). But Jim doesn’t think they will taper because the fundamentals have not changed.
The fundamental economy in the U.S. is in awful shape:
- 50 million Americans are on food stamps
- 24 million Americans unemployed or underemployed
- 11 million Americans on disability
Jim believes the Fed won’t taper the printing of money, so it will be bullish for gold (a rise in value) and bearish for the U.S. dollar (lower value).
A currency crisis is coming, sooner rather than later, and the British Pound is in the eye of the storm.
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