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3 minute synopsis of a recent video interview with Jim Rickards, author of Currency Wars, Senior Managing Director at Tangent Management Partners LLC, by Guy Johnson from Bloomberg Television’s “The Pulse”.
No Tapering of QE
Europe and the Euro
Bloomberg Television – The Pulse
Interview with Jim Rickards
November 15, 2013
NO TAPERING OF QE
Yellen has confirmed that the FED is nowhere near an exit to QE, and it will be a very long time before they do.
She said that what the FED is looking for is the evidence of a continued recovery. They’re not going to come up to their goals and then reduce QE or asset purchases; they’re going to go past them.
A paper that came out recently said that we’ve been so far below target on inflation and unemployment for so long, that they actually have to go past target – get higher inflation than they would like and even lower unemployment than they would like.
Then they want to see that be self sustaining before they taper, so Jim doesn’t see any tapering in sight.
EUROPE AND THE EURO
The Euro is going to go higher from here.
Jim believes that Europe has done just about everything right.
Greece, Spain and Italy’s so-called austerity is actually a structural adjustment that the United States needs.
They’ve lowered labour costs, improved labour mobility and maintained a strong currency.
Germany is going to have to have a little more inflation because if you’re going to have a European currency you need European metrics. You need price stability across Europe. So if the periphery is in deflationary mode then you need inflation in Germany.
Jim believes the Germans have accepted that.
Europe wants to do QE to avoid inflation. They don’t want to cheapen the Euro. They’re not joining the currency wars.
The reason you cheapen your currency is because the Japanese are doing it and the US is trying to do it. It’s not to help exports.
It’s to import inflation in the form of higher import prices.
The US market imports more than it exports, so a cheaper dollar increases prices for manufactured goods, textiles, electronics etc.
That’s what the FED wants. They’re desperate to avoid deflation. They’re desperate to get inflation.
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