Friday, July 4, 2014

James Rickards on Dollar Collapse & Euro as Future Reserve

James Rickards on Dollar Collapse & Euro as Future Reserve

Euro symbol in gold
Euro


This article is one of a three-part series based on my interview with James Rickards

Europe is Doing Everything Right, Euro Will Replace Doomed Dollar & EU Bond Market Will Trigger Dollar Collapse: Euro Will Replace Doomed Dollar
These articles were first published on my blog at blogactiv eu "EU vs. US: Commentary From the US.


Europe is Doing Everything Right

In a time of euro skepticism and criticism of E.U. affairs from many corners, James Rickards declared in an interview, "Not only is Europe doing a lot of things right, in fact, I think they are doing everything right."

U.S. Economist James Rickards, whose expertise lies in international finance and who has consulted the U.S. Pentagon and assumed such roles during his 35 years on Wall Street as Hedge Fund and Portfolio Manager, and Senior Managing Director for Market Intelligence OMNIS, spoke favorably of E.U. decisions and its handling of its sovereign debt crisis during our interview.

Each juncture of the E.U.'s evolution from its implementation of the Common Market directives in the mid-1990s, to the launch of the euro in 1999, to the E.U.'s ability to remedy its sovereign debt crisis has been met by financial and political experts with skepticism.

The E.U. currently has 508 million citizens to the U.S.'s 314 million, and its economy is now bigger than the U.S.'s. In addition, the E.U. is the headquarters to 178 of the Fortune 500 companies. I asked James Rickards, "While all of these facts that are found everywhere why is the E.U. underestimated by experts?"

"It is underestimated by experts in the United States … There's almost a kind of euro hatred in the United States. I don't know what to say about it except that they have been wrong for a long period of time."

"If you go back three years to 2011 or even to early 2012 you had very prominent economists like Nouriel Roubini, Paul Krugman; some of them were Nobel Prize winners, and they're running around with their hair on fire saying, "The euro is going to collapse. Greece is going to be kicked out of the euro."

"I was the one three years ago who said that's was all nonsense nobody is getting kicked out, no one is quitting. In fact the Eurozone will add members over time and the currency itself is strong and getting stronger, and it has played out exactly as I described."

"As a political project if the political will is there to succeed, then it will succeed because states are very powerful, and more powerful than markets."

James Rickards further added, "When you look at important parliamentary elections or referendums their pro- European forces have not lost one and there is very substantial progress in the direction of European economic integration." Rickards cited the fiscal and uniform banking regulations as examples.

Concerning the experts who were wrong in predicting the collapse of the euro, he stated, "They were not only wrong, but you don't hear much from them these days, you certainly don't hear Nouriel Roubini going out talking about the end of the euro because that's certainly not happening… how could so many smart people-these people are not dumb they are trained economists, and they have high IQ's - and so many market participants be so wrong?"

James Rickards authored Currency Wars: the Making of the Next Global Crisis .and the New York Times best seller, The Death of Money: The Collapse of the International Monetary System, which is an extensive reference work on the reasons the dollar will cease to be the world's reserve currency. Rickard's book provides an overview of the current landscape of the international monetary system.


James Rickards Favors Euro as Future World’s Reserve Currency


U.S. Economist James Rickards' New York Times best-selling book, The Death of Money: The Collapse of The International Monetary System, is an extensive reference work on the reasons the dollar will cease to be the world's reserve currency and provides an overview of the current landscape of the international monetary system.

Concerning the dollar collapse, he stated that it is inevitable, and at this point he is "waiting for an avalanche or a trigger for it to come tumbling down." In my interview with James Rickards, I asked him is there the possibility, of a role reversal between the E.U. and U.S. after the dollar collapse.

"Yes and it is certainly a possibility. I won't say the only possible outcome, but it is a very strong possibility. The European monetary zone, the euro zone already is larger and more powerful than the U.S. except for the fact that its fragmented into these 18 separate parts. They're moving very quickly to unification; they've taken large steps …. They've got more steps in preparation. So the more integrated they are the more they will look like what's called a United States of Europe."

During my interview, he made another prediction and became the first economist to answer the question, "What currency will replace the dollar?" James Rickards forecasts that if "A catastrophic collapse of the dollar does not take place the euro may replace the dollar anyway."

"The fact that Europe is making structural changes others are not; Europe is attracting Chinese capital. Europe is unifying Europe is doing pretty much everything right, so over time the world may find the euro as a very attractive alternative to the dollar. Actually, the currency already is… the problem isn't the currency; the problem is the investable assets. Anything can be a trade currency; the euro is a trade currency, … but a reserve currency is different to be a reserve currency you need a large pool of investable assets, things that I can buy and put in my portfolio, and that's where Europe actually falls down today. …they are broken down into these 18 separate debt markets they don't want to have a unified sovereign debt market. You can see that coming."

Rickards also talks favorably of the ECB versus the U.S. Federal Reserve, which he speaks negatively concerning Fed decisions. He stated concerning the ECB, " you have a central bank that actually sticks to what it's supposed to do, which is to maintain a sound currency and maintain price stability and doing a very good job of that.

He speaks very highly of the euro and favors it because of its gold reserves. In talking about the system after the dollar collapse he predicts, "It is entirely foreseeable what the new system look like and who the powers are who will be sitting around the table."

"One of the points I make is that you think of it as a poker game as a game … and I'm not saying were automatically going to have a gold standard, but gold will be your pile of poker chips and gold is going to determine whether you get a seat at the table or in the backroom sitting against the wall."

"Interestingly Europe, the European monetary zone that backs the euro-the 18 countries …they have the largest pile of chips, they have over 10 thousand tons of gold. The United States comes in second, we have about 8 thousand tons of gold, after that believe it or not is the IMF, the International Monetary Fund, they have almost 3 thousand tons of gold."

"China is playing a very interesting game, China officially says that they have 154 tons, they said in 2009, but there is very good data that they have secretly acquired thousands of tons of gold since then. That's not some deep dark conspiracy, we can see that with hard data, we can see it in Chinese mining operations and Chinese imports through Hong Kong and sources, and these are all discussed in Chapter 9 and 11 of my book, The Collapse of Money, so it is all very well documented. You can put China for 3 or 4 thousand tons of gold at this point, and they are still acquiring more."

"So the collapse is coming, it is completely predictable, gold is going to determine who gets the biggest voice in the new system. And Europe has the largest pile of gold, so they are going to be the biggest player in this reset."

EU Bond Market Will Trigger Dollar Collapse


U.S. Economist James Rickards' New York Times bestselling book, The Death of Money: The Collapse of the International Monetary System, is an extensive reference work on the reasons the dollar will cease to be the world's reserve currency and provides an overview of the current landscape of the international monetary system.

In an interview with James Rickards, he stated, "Europe is doing everything right" and he predicted that the euro would most likely overtake the dollar as the world's reserve. He added that to be a reserve currency rather than a trade currency the E.U. needs a "unified sovereign debt market."

"And that's where Europe actually falls down today. …they are broken down into these 18 separate debt markets. They don't want to have a unified sovereign debt market. You can see that coming at which point once you take the integration a few steps further…and create this unified European sovereign debt market where the bonds are issued or backed by the full faith and credit of the Eurozone; then it will be in a position to displace the dollar."

"The next step, the next thing coming is the creation of a true European sovereign debt market, they don't have that right now. When the total amount of euro denominated sovereign debt is comparable to the US treasury market … the euro is positioned to displace the dollar as the global reserve currency."

"The reason that has not happened so far is because while the total European sovereign debt is comparable to the U.S. treasury market, it is broken into separate markets: you have Italian debt, Spanish debt, German debt, Netherlands debt etc. It's all denominated in euros, but it comes from numerous different issuers and not one of those markets is able to absorb the capital flows we see going into treasuries."

"Now what will happen next is that Europe will agree that European sovereign debt going forward will be backed by the full faith and credit of the Eurozone. That is an enormously important development… The euro actually could displace the dollar as the leading reserve currency at that point. Germany is controlling all this. Germany has not wanted to do that yet."

"Have you had a chance to look that over the Commission Green Paper on Stability Bonds?"

I have and this is coming, but Merkel's playing a very tough game. She doesn't want to go there right away because she thinks it would be too easy...t would let the Greeks, the Portuguese and the Irish, it would let them off the hook. She wants to see more structural reforms. She wants to see more economic adjustment, fiscal responsibility, improvements in labor laws, and improvements in labor mobility, etc. ….When she gets it then she will embrace this unified debt market that were talking about, but not yet because she wants to see more progress, but we are getting progress. This is moving in the right direction…This might be three or four years away. It's going to happen, and I expect that it will… I think that you'll see the Chinese, The Russians, Arabs the remainder of the BRICS, and other countries around the world flocking into European Sovereign Debt, and that will be extremely detrimental to the role of the dollar. That's kind of best case that's if we don't have a crisis.

Purchase any of Jame's Rickards books below:
The New Case for Gold
The Death of Money: The Coming Collapse of the International Monetary System
Currency Wars: The Making of the Next Global Crisis