Wednesday, February 8, 2012

Currency Wars: The Making of the Next Global Crisis. James Rickards Interview

[Financial Safety Services article commentary:

This is an interesting interview of "A Wall Street pro named James Rickards ", for a number of reasons, two of which are:

1] his belief that the ownership of large amounts of US Federal debt by the Chinese government is not the threat to the U.S. that it is often perceived to be.

2] his belief that the Euro, despite present appearances, is ultimately a far stronger fiat currency than the $US.

While I am not saying he is right or wrong in either case [or in any other instance], hopefully these and other expressed opinions of his might at least give you pause for thought if you presently steadfastly believe whatever it is you steadfastly believe our economic future will be.

As always, I maintain that the economic future remains largely unknown, and that therefor the best way to protect long term savings is via a savings plan that deliberately avoids any slant towards any imagined future economic scenario.

Speculations?

On the other hand, if you are lucky enough to have money that you could afford to lose, I can see no harm in using a little of that to "take a flyer" on any one, or all of his predictions, assuming you can see reasonable reward/risk ratios [i.e equal to, or greater than 100:1], and can establish psychologically reasonable buy in prices, stop losses etc. etc.

Happy speculating, Regards , Financial Safety Services]



Euro Pacific Precious Metals' CEO Peter Schiff often talks about competitive devaluation of currencies as the main driver behind our gold and silver investments. Recently, Peter sat down with James to get his perspective on what's behind these currency wars, and find out what he recommends investors do to preserve their wealth through this tumultuous time.

Peter Schiff: You portray recent monetary history as a series of currency wars – the first being 1921-1936, the second being 1967-1987, and the third going on right now. This seems accurate to me. In fact, my father got involved in economics because he saw the fallout of what you would call Currency War II, back in the '60s. What differentiates each of these wars, and what is most significant about the current one?

James Rickards: Currency wars are characterized by successive competitive devaluations by major economies of their currencies against the currencies of their trading partners in an effort to steal growth from those trading partners.

While all currency wars have this much in common, they can occur in dissimilar economic climates and can take different paths. Currency War I (1921-1936) was dominated by a deflationary dynamic, while Currency War II (1967-1987) was dominated by inflation. Also, CWI ended in the disaster of World War II, while CWII was brought in for a soft landing, after a very bumpy ride, with the Plaza Accords of 1985 and the Louvre Accords of 1987.

What the first two currency wars had in common, apart from the devaluations, was the destruction of wealth resulting from an absence of price stability or an economic anchor.

Interestingly, Currency War III, which began in 2010, is really a tug-of-war between the natural deflation coming from the depression that began in 2007 and policy-induced inflation coming from Fed easing. The deflationary and inflationary vectors are fighting each other to a standstill for the time being, but the situation is highly unstable and will "tip" into one or the other sooner rather than later. Inflation bordering on hyperinflation seems like the more likely outcome at the moment because of the Fed's attitude of "whatever it takes" in terms of money-printing; however, deflation cannot be ruled out if the Fed throws in the towel in the face of political opposition............" Original,complete article here.

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Financial Safety Services is NOT an investment advisory service. Financial Safety Services is an educational service that teaches the interested individual non-original [i.e. invented by others far more intelligent than myself], time-tested safe methods/principles that might be successfully used by the individual for relatively low risk speculations in various financial markets.

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