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A 3 minute synopsis of Part 1 of the February 12, 2014 interview with Jim Rickards, author Currency Wars: The Making of the Next Global Crisis and the forthcoming The Death of Money: The Coming Collapse of the International Monetary System and portfolio manager of the Westshore Funds, by Lauren Lyster from Yahoo! Finance – The Daily Ticker
Yahoo! Finance – The Daily Ticker
Interview with Jim Rickards – Part 1
February 12, 2014
Jim says the FED is always surprised because their models are flawed — their economic record is about the worst in economics, and that’s not just rhetoric.
When you go back and actually look at their one-year forecasts for the last four years, every one of them was wrong, in orders of magnitude.
They have a terrible forecasting record. So the fact that Janet Yellen was surprised by the data doesn’t surprise Jim — they are always surprised.
People looked at December’s weak data, and while the conventional economists said it was the weather, a lot of people said, “Look behind the numbers — it wasn’t weather.” There were a lot of low paying jobs, labour force participation was declining, etc. We should expect continued weakness.
Jim says that he, and others, were not surprised by January, because it was shown statistically that it was nothing to do with the weather.
In January the weather had even less of an effect than it had in years past. So this was not a surprise to some people, but it was a surprise to Yellen.
Also, the FED has missed every bubble for the last twenty years.
They didn’t get one of them right.
Bernanke is on record in 2007 speaking about the mortgage meltdown, saying it was going to blow over.
So, the FED has a terrible forecasting record. They don’t see bubbles. They are always surprised.
As far as continuity, Jim says that for the last five years the FED have been making it up and they’re going to keep making it up — they don’t know what they’re doing.
The FED has had fifteen different policies since 2007 — QE1, QE2, QE3, Operation Twist, Currency Wars, Forward Guidance, Nominal GDP Targets — you go down the list and they’ve had fifteen different policies.
What this tells Jim is that they don’t know what they’re doing and they’re making it up.
He expects that to continue.
The FED will say their policy is data dependent — which it is, that’s true.
The data has been coming in weak so Jim would expect them to pause tapering by mid-year — probably the June meeting.
$10 Billion in March is baked in the pie. That’s because it’s the first meeting that she is the Chair. She didn’t Chair the January meeting because Bernanke was still Chair, so she’s not going to walk into the room in March and tear up policy.
So Jim says to expect $10 billion of new asset purchases in March.
By the time we get to the May, June and July meetings, if the data comes in weak then look for a pause.
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