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A 3 minute synopsis of the March 20, 2014 interview with Jim Rickards, author of the forthcoming The Death of Money: The Coming Collapse of the International Monetary System, and also the portfolio manager at West Shore Funds, by Lauren Lyster from Yahoo! Finance – The Daily Ticker
Financial War with Russia
Yahoo! Finance – The Daily Ticker
Interview with Jim Rickards
March 20, 2014
FINANCIAL WAR WITH RUSSIA
Financial warfare is really all we have.
No one thinks there are going to be boots on the ground in Sevastopol. No one, left or right, is advocating that.
But the U.S. has to be seen to being doing something to protest what Putin is doing, so the U.S. has announced economic sanctions, which is a form of financial warfare.
Jim doesn’t think these sanctions are going to go very far. The markets have correctly read this and they haven’t overreacted.
So a few oligarchs don’t get to go to the Superbowl, or your credit card doesn’t work when you get to Geneva — that’s about it.
There are a lot of calls from very prominent investors, military officials and pundits saying that these sanctions should be a lot tougher.
They won’t be.
Here’s why: Russia can fight back with their own forms of economic warfare.
We had very tough sanctions on Iran.
Sanctions were moving in the direction of destablizing the Iranian regime. Interestingly, the President took them off in December 2013. Jim thinks that sends the wrong signal to Putin.
It says to Putin that not only is the U.S. going to do weak sanctions, but they’ll take them off just when they’re starting to have some effect.
But if the U.S. does something more extreme, like freezing Putin’s assets, freezing Russian state assets which are flowing through the financial system, then they will strike back.
They can refuse to pay their U.S. dollar debt. They can freeze U.S. assets. And they can do worse than that — they can unleash their hackers and take down the New York Stock Exchange.
No one wants to go there.
No one wants it to escalate.
In the short run it’s not very feasible to get away from the U.S. dollar system. Russia would certainly like to do that. So would China. So would a lot of people.
It’s easier said than done because it’s not just the trade currencies and transactions, it’s also the questions of where to put your reserves.
You need investable assets, and the treasuries market is the only pool of investable assets — other than gold.
Interestingly, Russia has increased their gold reserves 70% in the last four years. China has increased their gold reserves several hundred percent — no one knows the exact number because they’re not transparent.
A lot of these countries are saying, “Okay, maybe I’m stuck with dollars and the Euro sovereign bond market, which is big in the aggregate but it’s so segmented — you’ve got Italian bonds and German bonds and French bonds. There’s no such thing as a Euro bond backed by the Eurozone.
But you can buy gold.
And they are buying gold.
Coins and Crowns
words and music Elaine Diane Taylor
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from the album Coins and Crowns