3 Minute Gold News
A Quick Read for Busy People
3 minute synopsis of a recent video interview with Jim Rickards, author of Currency Wars, senior managing director at Omnis.
Topics:
Jackson Hole Central Bankers Annual Symposium
Fed to Emerging Markets: Drop Dead
Euro Zone policy vs UK policy
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Jim Rickards
Bloomberg News Interview
August 25, 2013
Regarding Jackson Hole
In 1975, New York city was looking for a bail out, and then President Ford denied the bailout. There was a famous headline in the New York papers: “Ford to City: Drop Dead.”.
Jim Rickards’ interpretation of this year’s Jackson Hole is “Fed to Emerging Markets: Drop Dead.”.
The emerging markets have their own problems that are not part of the Fed mandate.
The Fed is focused on the American economy. If there are capital outflows from these emerging markets they are just going to have to deal with it.
This is consistent with what Ben Bernanke said in Tokyo in October, 2012. It is also a reprise of what Secretary of the Treasury John Connally said to the G7 in 1971 when Nixon went off the gold standard: “It’s our currency, but it’s your problem.”.
Now we’re saying it to the emerging markets.
How do you price a black swan? Some of it is priced in but these things have the ability to spin out of control. It’s all well and good to sit in a think tank or university and tell the emerging markets that if they want to defend their currencies all they have to do is raise rates a little bit, and let the dollar go down. But raising rates hurts their exports and has employment issues.
Maybe it can be finessed and maybe it cannot. In 1997 and 1998 we saw it spin out of control. It has that potential. Jim is not predicting a catastrophe, but they’re playing with fire a little bit.
Regarding the central bank in South Africa, as well as other emerging markets and places like Australia, you can do one of several things: You can raise rates, but that’s not likely because of the consequences.
The other thing you can do is capital controls.
The IMF, for decades, was adamantly opposed to capital controls. Now they’ve said publicly and academically that there may be a place for that. We may now see some capital controls in the BRICs and elsewhere.
Regarding Tapering
The problem is outflows from capital markets in anticipation of whether or not there will be QE tapering. What this is all about is tapering.
Are they going to taper or not on September 18, 2013?
The Fed is evenly divided. It’s too close to call.
Jim’s view is that they are not going to taper.
That would be bullish for the stock market and give a little relief to the emerging markets. It would probably be bullish for gold.
If they do taper, then the full impact of that is not priced in.
Whether a big rally if they don’t taper, or a little more of a draw down with possible catastrophic outcomes if they do taper.
This is the problem with manipulating markets: you paint yourself into a corner and there’s no good way out.
Regarding Euro Zone Policy and UK Policy
Jim believes Europeans, led by German Chancellor Angela Merkel and others, are doing just about everything right. Bank of England Governor Mark Carney is doing just about everything wrong. So Jim wouldn’t put them in the same basket.
Europe is going its own way.
Take the Euro zone, UK, Japan, US and China. All these blocks need to make structural adjustments. The only one that’s stepped up to the plate and gone through the adjustments, as painful as it’s been, has been Europe.
Europe will just go its own way, and you’ll see the Euro strong and getting stronger.
You’ll see Europe print a little bit of money to save the Euro, but they won’t do it for the sole purpose of quantitative easing of inflation.
Carney has done the opposite.
Carney has taken a hard approach, in that he’s said that he’s going to plant a stake around a target and keep printing until he gets there.
Jim sees Merkel and Carney on separate planets and believes you should expect more inflation in the UK.
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Another Week on Wall Street
words and music Elaine Diane Taylor
© 2013 Intelligentsia Media Inc. All rights reserved.
SOCAN/ASCAP
from the album Coins and Crowns
Another Week on Wall Street
See the bankers wave the Wall Street wands
See the conjured piles of paper green
Now they’re betting all their tricks go wrong
They’re betting the world as you know it
If they win
You lose the whole world as you know it
Ever seen a long con?
Ever seen a tampered wand?
Ever seen the betters sipping tea?
Making bets just sipping tea
Well don’t talk back
Your betters
Your bankers are having a tee, hee, hee
Heyo heyo, just another week on Wall Street
Heyo heyo just another week on Wall Street
A little grease (Greece) is floating out to sea
Little PIGS (Portugal, Italy, Greece, Spain) are bobbing up and down
So send a storm and we’ll see
when the tide goes out who’s naked on the beach
Ever seen a long con?
Ever seen a tampered wand?
Ever seen the betters sipping tea?
Making bets just sipping tea
Well don’t talk back
Your betters
Your bankers are having a tea, hee, hee
Heyo heyo, just another week on Wall Street
Heyo heyo just another week on Wall Street
Who’s that wizard hiding behind that hedge?
Who’s that wizard hiding behind that hedge (fund)?
See the bankers wave the Wall Street wands
See the conjured piles of paper green
Now they’re betting all their tricks go wrong
They’re betting the world as you know it
If they win
You lose the whole damn world as you know it
Ever seen a long con?
Ever seen a tampered wand?
Ever seen the betters sipping tea?
Making bets just sipping tea
Well don’t talk back
Your betters
Your bankers are having a tea, hee, hee
Heyo heyo, just another week on Wall Street
Heyo heyo just another week on Wall Street
Elaine Diane Taylor 