Thread: Currency Wars - Jim Rickards

Jim Rickards is worth following. I was recommended his latest book, Currency Wars last Summer. Still haven't got it yet.

Here is a short interview:

A worthy note, here. Pento made a prediction. Let's see how right or wrong he turns out to be this years.

Sabang? Anyone have an opinion on currencies and the US stock markets reacting negatively to the 'tapering?'

Prepare for Currency Chaos

Michael Pento
Pento Portfolio Strategies
Posted Jan 29, 2014

On November the 25th I published the following warning about the effects from the Fed's imminent tapering of asset purchases:

"There is a good chance that the beginning of tapering will lead to a reversal of the trade to sell gold ahead of the news. But the major averages have priced in a sustainable recovery on the other side of QE, which will not come to fruition. For the Dow, S&P 500 and NASDAQ the end of QE will be especially painful. A unilateral removal of stimulus on the part of the Fed will send the dollar soaring [especially against emerging market currencies] and risk assets plunging -- you could throw in emerging market equities and any other interest rate sensitive investment on planet earth."

That prediction unfortunately came into fruition as the calendar turned the page to 2014 and tapering of asset purchases began. The sad truth is that global central banks have partaken in unprecedented intervention into the functionality of markets and that has now set the stage for massive and destructive moves in currencies and interest rates.

We are currently suffering through a huge correction in the equities of emerging market economies. The threatened end of Fed stimulus has caused these currencies to plummet against the dollar, taking their markets down for the ride.

But it's not just emerging markets that will feel the pain. I next predict the unwinding of the colossal Yen carry trade in the near future. The Yen has lost 25% of its value against the dollar in a little over one year. The Abe regime has been successful in weakening the Yen against the Greenback, despite the fact that it has withstood the assault of over a trillion dollar increase in the size of the Fed's balance sheet in the past year alone. Yen weakness is clear evidence that currency traders anticipate the imminent end of Fed money printing and an increase in Treasury yields.

The investment world has poured into investments that short the Yen and go long the Japanese stock market. Think about the Japan Hedged-Equity ETF (DXJ): Investors have piled over $12.6 billion into this fund, which has soared 25% in the past year.

Japan illustrates the current competition amongst central bankers to see who has the best ability to destroy their currencies. However, the U.S. Federal Reserve has kept interest rates at zero percent for over five years and has monetized $3.3 trillion of debt during that same time frame.

Global central banks will soon learn a painful lesson that for every action there is an equal and opposite reaction. The Fed's unilateral unwinding of QE-in the nation that owns the world's reserve currency-is an addiction extremely difficult to overcome. I expect massive disruptions in equities, interest rates and currencies this year as the baneful consequences of massive central bank manipulation of markets begins to manifest.

###

Michael Pento
President: Pento Portfolio Strategies
(O) 732-203-1333
(M) 732-213-1295
email: mpento@pentoport.com
website: Pento Portfolio Strategies LLC | Commentary

Michael Pento is the President and Founder of Pento Portfolio Strategies (PPS). PPS is a Registered Investment Advisory Firm that provides money management services and research for individual and institutional clients.

Michael is a well-established specialist in markets and economics and a regular guest on CNBC, CNN, Bloomberg, FOX Business News and other international media outlets. His market analysis can also be read in most major financial publications, including the Wall Street Journal. He also acts as a Financial Columnist for Forbes, Contributor to thestreet.com and is a blogger at the Huffington Post.

Prior to starting PPS, Michael served as a senior economist and vice president of the managed products division of Euro Pacific Capital. There, he also led an external sales division that marketed their managed products to outside broker-dealers and registered investment advisors.

Additionally, Michael has worked at an investment advisory firm where he helped create ETFs and UITs that were sold throughout Wall Street. Earlier in his career he spent two years on the floor of the New York Stock Exchange. He has carried series 7, 63, 65, 55 and Life and Health Insurance Licenses. Michael Pento graduated from Rowan University in 1991.

321gold Ltd

http://www.321gold.com/editorials/pe...nto012914.html

got a feeling that something really bad is coming down the track.
WAR.

Interesting, first I seen of Jim Rickards. I follow Gerald Celente though, who has a similar rhetoric, here's a piece a few months back about currency wars and WW3

Boom, gloom & doom- seems to be a whole industry these days.

If you think it's all going to shite, and want a 'safe haven' currency, i'd go the SFR before the USD- which would probably appreciate on a flight to quality basis, but unfortunately not really backed by any fundamental quality. None of 'em pay a real interest rate anyway- personally i think a basket of boring old blue chips with a decent dividend makes a lot more sense. But then again I don't think we're about to fall off a cliff.

9999

Thank you for that comprehensive Celente interview.

I've been following him for years. He covered a lot of bases.

I'll report more on my book I'm reading as I finished chapter 2 today.

Good opportunity for Scotland to get it,s own currency.

As for the Celente interview, it seems that Gerald Celente read Currency Wars and was repeating the point in the book to some degree. Although of course, there are many who see it the way James Rickards does.

Rickards has a new book coming out this April.

it was an interesting vid by mr. celente 9999.
difficult to believe a single word that comes from a politicians mouth these days.

the funniest quote came from the Duke Of York at Davos.
'We need to have more equality in society'.

How many thousands of people have died already because of the squeese.
In our hospitals,, the suicide rates,, shoot outs at the ok coral.
Nowt compared to what's going on in the mid. east
Must be millions of dead and broken hearts already
And the politicians say we're on the up,, that we've turned the corner.
But in the uk, after the next election another 25 billion pounds in cuts has to be found.
And then the tapering in the usa and here.
Jees my savings.

Originally Posted by billy the kid

And then the tapering in the usa and here.
Jees my savings.

With basically 0% interest rates, you are not even breaking even.

You are losing money.

There are some currency battles happening now. Can someone with some backgound (Sabang or anyone else?) give some info on this? It's obviously inter-related. What is this, "unlimited intervention?"

A common message in this article is that interest rates will likely be rising in these countries. Same for the US?


Emerging market storm spreads to Russia as rouble wobbles

Russian central bank vowed “unlimited” intervention to defend the rouble after it fell to a record low against a basket of currencies

Moscow has already burned through $7bn of reserves since early January Photo: AFP


By Ambrose Evans-Pritchard

30 Jan 2014

The simmering crisis in emerging markets has spread to Eastern Europe, forcing Russia and Romania to defend their currencies against capital flight and triggering a sharp rise in Hungary’s borrowing costs.

The Russian central bank vowed “unlimited” intervention to defend the rouble after it fell to a record low against a basket of currencies.

Moscow has already burned through $7bn of reserves since early January. Yields on Russia’s two-year “cross-currency swaps” – closely watched by traders for signs of a liquidity crunch – rocketed by 60 basis on Thursday to 7.6pc. They have risen by 140 points in the past three weeks.

Two-year swap yields showing liquidity crunch

While there is no single cause for the emerging market sell-off, the backdrop is a combined monetary squeeze by the US and China that is draining liquidity from the global system.

Russia’s central bank governor, Elvira Nabiullina, said she would not allow a disorderly rouble slide or risk widespread damage to the financial system, backing away from earlier pledges to free the exchange rate. “We are not planning to quit intervention,” she said.

James Lord and Meena Bassily, from Morgan Stanley, said Russia faces an invidious choice, since any move to defend the rouble automatically tightens monetary policy, pushing up borrowing costs. Russia learnt a hard lesson in 2008-2009 when it spent $200bn of reserves defending the currency but in the process caused a collapse of the money supply and destroyed part of the banking system. Yet it cannot risk a policy of benign neglect at a time of stubbornly high inflation and capital outflows that reached $63bn last year.

Tatiana Orlova, from RBS, said there is a risk of “a run on the currency” unless the authorities take decisive action.

In Hungary, 10-year bonds have jumped 60 points over the past week amid reports that the central bank will be forced to ditch plans for rate cuts to shore up the economy. The bank said it is watching the forint “very carefully” after a 7pc slide this month, a drop seen as “too big” for safety.

“Central and Eastern European currencies are starting to wilt. Hungary is trading on very thin ice, but even Poland is vulnerable,” said sovereign bond strategist Nicholas Spiro.

The fresh ructions came after Turkey’s “shock and awe” move to double interest rates on Tuesday failed to restore confidence in the lira, leaving it unclear what the country can feasibly do next. A less drastic move by South Africa had equally meagre results.

“Our concern is that this could lead to a new phase of the crisis,” said Neal Shearing, from Capital Economics. “These countries are caught between a rock and a hard place.”

Analysts say Turkey has ended up with the worst of both worlds. The rate shock will shatter growth and could trigger recession but the authorities have used up their last credible tool for defending the currency.

Lars Christensen, from Danske Bank, said: “Everybody knows that Turkey cannot raise rates by another 500 basis points and nor can they sustain the current rates for long because it will kill the economy.

“I fear the only way out of this may be capital controls, though it would be disastrous if the world goes down that route. These countries should stop trying to defend quasi-pegs and just let their currencies fall. We now have a very risky situation where several central banks are responding to weakening growth in China by tightening policy, which makes it worse.”

Turkey’s finance minister, Mehmet Simsek, denied that there are any plans for capital controls but admitted that the issue “had come up” and was being studied. It has been widely reported in the Turkish press that premier Recep Tayyip Erdogan favours such curbs as less damaging than a monetary squeeze.

Dominic Byrant, from BNP Paribas, said Turkey is the country most at risk, punished for a current account deficit above 7pc of GDP and external debt equal to almost 180pc of exports. But any state with a trade deficit, sticky inflation that also depends heavily on exports to China, is at risk. “Brazil and Indonesia stand out as obvious candidates: 20pc of Brazil’s exports go to China,” he said.

Entire: Emerging market storm spreads to Russia as rouble wobbles - Telegraph

Thailand certainly has problems these days but so many other countries do, too. Argentina has been in the news. Russia seems to be seen in a more negative way these days. The middle east is a mess. Africa has some conflict again. The US seems to be calm but the inequality and lack of buying power of that population has to take some sort of toll on things. War and effects on currency seem certain in the coming years. To me the world's problems collectively and as countries are as troubling as Thailand's future.

This fellow has the credentials. Very good interview.

An interview with James Rickards using graphs and data.

Jim Rickards: The Coming 25-Year Great Depression

Originally Posted by Black Heart

An interview with James Rickards using graphs and data.

Jim Rickards: The Coming 25-Year Great Depression

Coming...??
The reality might suggest that it's already here - just being laminated with the expected fantasies.

It's the stone age or my way, take your pick.

Rickards on the Federal Reserve

What will rising interest rates mean?

Click link for Rickards interview. It's very short.

Fed Theoretically Can Never Raise Rates: Rickards


(Bloomberg) -- When Group of 20 finance ministers this week urged the Federal Reserve to “minimize negative spillovers” from potential interest-rate increases, they omitted a key figure: $9 trillion.

That’s the amount owed in dollars by non-bank borrowers outside the U.S., up 50 percent since the financial crisis, according to the Bank for International Settlements. Should the Fed raise interest rates as anticipated this year for the first time since 2006, higher borrowing costs for companies and governments, along with a stronger greenback, may add risks to an already-weak global recovery.

The dollar debt is just one example of how the Fed’s tightening would ripple through the world economy. From the housing markets in Canada and Hong Kong to capital flows into and out of China and Turkey, the question isn’t whether there will be spillovers -- it’s how big they will be, and where they will hit the hardest.

“Liquidity conditions globally will start to tighten,” said Paul Sheard, chief global economist at Standard & Poor’s in New York. “Emerging markets won’t be the only game in town. You will have a U.S. economy that is growing more strongly and also offering rising interest rates and a return on capital that is starting to vie for new investment opportunities around the world.”

The broad trade-weighted dollar has strengthened 12.3 percent since June, and it’s forecast to advance further as the Fed tightens while the European Central Bank starts buying sovereign debt and Japan extends record stimulus. The stronger greenback will be the main channel through which the rest of the world feels the effects of a tighter Fed policy, according to Joseph Lupton, a senior global economist at JPMorgan Chase & Co. in New York.


Entire: Here's a $9 Trillion Question - Bloomberg Business

Swiss Billionaire: "The Fed has No Way Out."

He notes the ECB, Quantitative Easing, Devaluing of currencies, Gold, and the Fed.

the European Central Bank starts buying sovereign debt

U.S. economy that is growing more strongly and also offering rising interest rates and a return on capital that is starting to vie for new investment opportunities around the world.”

I guess the money that's meant to stimulate Europe will end up over the pond in the US economy.

with the thread bumps I guess it means milkman is back

on the max and stacy show
having just a quarter oz of gold could turn out to be a life saver
an ounce could be worth vast amounts
above what you paid.

listening to uk conser. politicians everything is working well and we're on the road to recovery.
but at what price.