good afternoon and welcome to capital account i'm lauren mr here in washington d.c. and a report from u.s. congress says the chinese renminbi their currency could threaten the dominance of the u.s. dollar we're going to decade now we've seen tough talk between the countries on currency before and now is no exception actually but are we already in the throes of a currency war we talked to james byrd's who certainly thinks so meanwhile u.s. president barack obama called the asia pacific region a top priority of u.s. security and policy and the u.s. has stationing troops in australia reportedly to counter china's expanding influence some of our marines will be good will taking through these parts it's

a training exercise with you and the work of partners plus the region for the security we all want but could the next war be waged not with boots on the ground or for that matter drones but with financial weapons i'm talking stocks bonds and derivatives and one clothing company think they have a better solution for us trying to relay said paperwork is meant to make love not war about the obama smooching time as president hu jintao and benetton new ad it's obviously a fake photo but we'll give you the real story let's get to the dade county to look out.

u.s. president barack obama is in the middle of a nine day trip and the asia pacific region and according to reports really does all boils down to one thing this is about china and its focus on china's expanding influence now high on obama's list reportedly is getting commitment from china to enact a more flexible currency rate ok what else is new we have seen this song and dance before over currency valuation meanwhile the u.s. congress has just issued a new report and it says that the china currency that you will on the redmen be that it could threaten the dominance of the u.s. dollar within a decade but we ask our real already in the middle of a currency war james records my guest argues absolutely and he actually wrote a book on it it just came out it's currency wars the making of the next global crisis i interviewed him earlier today and he explains going on right now as he sees it take a listen we see rhetoric of course very publicly between the u.s.

and china over currency manipulation we just got a pact with president obama coming out against china china firing back we also saw u.s. congress did come out with a report saying that the renminbi could mount a challenge to the dollar and five to ten years you say that challenge is going on now in a currency war is going on how is it playing out. well you know i don't like to accuse the chinese of currency manipulation that every country manipulates this currency to some extent where what we call manipulation they call policy so i don't think anyone is exempt from that but the the u.s. is the biggest currency manipulator in the world when you look at quantitative easing which is just money printing the q e two in this new operation twist all forms of monetary ease people think it's about lowering interest rates it is a little bit but it's really about cheapening the value of the dollar the theory is that if you have a cheaper dollar it makes u.s. exports more attractive so it will sell more boeing aircraft or general electric wind turbines and cetera the problem is it's starts out ok but it never works out

that way there's retaliation other countries try to chip in their currencies where they put on capital controls where they put on excise taxes and currency words turn into trade worse and i describe two previous currency wars in my book what i call currency world on in the one hundred twenty s. and thirty's and currency war two in the one nine hundred sixty seventy's on into the eighty's they both had disastrous results and we're starting down the road again there's a temptation to think you can get a quick fix for your economy by cheapening your currency but it never works out that way just cause inflation stagflation recession and retaliation and i want to get a little bit more and the history add those two words that person i want to bring an average happiness because you have a specific question you wanted to ask it up it was record so i want to stay with that issue of manipulation and also you brought a currency wars one in two and in the second currency war a lot of people don't actually know and you talk about this in your book that there was a private market for gold before nixon closed the gold window and that's the long

the gold bull pool was about and it was about the suppression of the price of gold because the central banks in the governments didn't want the markets to push up a price and to expose kind of the money printing that was going on during the sixty's what do you think is the analogy today is there an analogy and what sort of market manipulation do you see by governments as a go bag as a president of the price of gold what any kind of indicator of it shows what the government of the government are doing as far as these currency wars are concerned . it's a good question to you there's always been a private marketing gold in addition to the gold standard now the classical gold standard of the eight hundred seventy s. the private market in the public market with the same because countries were responsible and they managed their currencies in such a way to maintain the price of gold we come forward to the one nine hundred sixty s. what was happening was the official price ago it was thirty five dollars an ounce but the private market was getting up to forty forty one forty two so the g seven governments plus whistle intervene and started selling gold into the market to drive the private price spec down in theory if you went too low they would buy some

gold and kind of conduct open market operations what happened over the course of the sixty's was that the gold selling operation the manipulation operation got out of control that they were just losing too much gold and by nine hundred sixty eight it was a one way bet the private market was up here and people were just buying all the gold that governments would offer so they played close down the london gold pool we remained on the gold standard to fund the one thousand nine hundred ninety seven iran present nixon said sorry even even countries can no longer get caught from the states ago was abandoned completely now today the market price of gold we all know is about seven thousand seven hundred eighteen hundred dollars and now it's like to say we're still on the gold standard i get paid hours but i'll go out buy gold bullion and you know put it in secure storage so i got my own you know gore supply and i recommend the same thing for other investors so we're still on the gold standard just not in the fixed price but to go back to a go stand which is one of the things i talk about the book the implied price of that is much much higher on the order of say seven thousand dollars an ounce it's

not a pie in the sky your projections just the ratio of paper money to gold when you actually do that math that's where you come out there's a range that's about where you come out so what's going on today we have seen gold mining operations was a footnote in the c.i.s. the bank printer national selling its annual report the year before last at the school is this this is a by the way central bank operations and told that information is kept the secret is nuclear war fighting codes and there might actually be easier to find out how launching new. missal them to find out what the fed does in the gold market is there you know they're lying to the people they're not transparent about what they're doing there is manipulation going on the extent of it it's hard to say all the circuit operations whether it's leasing or or other kinds of price oppression or this appears to be difficult to say but it's clearly going on as they could have manipulation mr records and government if manipulation of gold in one hundred thirty three the government actually confiscated private citizens called right and you've talked about how the new york fed holds a lot of gold for other countries here in the united states do you think that

confiscation of private citizens gold or other countries gold could be a possibility. well i'm always amazed that you go back to the first day of the roosevelt administration after you are in one thousand march twenty thirty three he issued a series of executive orders and he did confiscate all the gold of all the u.s. citizens he also closed every bank in the united states every bank was shut down it was called the bank holiday can you imagine a president trying to do that today and i can't by the way the legal authority is still there the legal authority hasn't changed i think of that if the government came after people's call today it would be a lot of resistance but i see a son necessary where the government will do if you see the price of gold go to five six seven thousand dollars an ounce which i think it will in order to stabilize money they'll just put on an excess profits tax they'll say all you people who board gold at say a thousand or twelve hundred it's now we're six thousand that's an unfair windfall profit we're going to print ninety percent went for profits tax on you government some things like that before so they won't confiscate the gold who just tax away all your profits as far as the foreign gold in the united states that's

a very interesting question people don't know fort knox was build to hold the goal that f.d.r. took from the american people they they ran out of room in the basement the treasury and i had to build a wall of u.s. school is not at the federal reserve bank of new york u.s. gold is half of fort knox and half of west point but there are six thousand tons of gold at the federal reserve bank of new york that the loans mostly to europe japan and the i.m.f. now i'm not saying this would happen lightly or any time in the near future but in extremis if you saw a collapse of the dollar the u.s. could confiscate that gold there's another three thousand tons out by j.f.k. airport and where involves run by scotiabank and h.s.b.c. they could confiscate their fuel so with us a thousand tons six thousand tons from europe and three thousand tons from private hands the u.s. would have you know upwards of seven hundred thousand tons which would be seventy percent of the official gold supply in the world that's about where the united states was in one nine hundred forty four at the end of world war two when we started bridge wood so the u.s. could really reboot the entire financial system and issue

a new go back to our it's like starting again over wiping out all the debts and speaking of a pullback dollar i want to talk just real briefly about as d.r. . i an athlete issue do you think it would be possible for them to do that with any credibility without it being backed by something like gold. well there certainly going to try i think in the adult fail it's a very good question laura but i think they'll try i think this is the preferred solution of the elites what i call the davos crowd you know the power elite the central bankers the finance ministers the treasury officials people the i.m.f. etc the easiest way to think about the fed has a printing press they can print dollars the e.c.b. european central bank has a printing press they can print your us well the i.m.f. has a printing press too they can print these s.-t. r.-a sort of special drawing rights it's world money it's not backed by anything it could be handed out and countries can actually counted as part of the reserves and use that to settle the balance of trade with each other and they could swap it for other currencies and use those to spend to invest so it's just another form of

printing money it's completely unaccountable i mean who worked at the i.m.f. but the thing is the next time there's an acute phase of the financial crisis something like the lehman moment in two thousand and eight it's going to be bigger than the fed the fed took a balance sheet from eight hundred billion to three trillion to fight off the crisis in zero eight what are they going to do go to nine trillion that's not credible but what they will do is print these us three r's so those so i view the entire future of the international monetary system as a race between s.t.r. us and gold i think gold's going to win but as two hours will give it a run for the money well that's interesting it's certainly something to think about as many think as right here on dish out predict that there will be a lehman moment coming out of the bureau's down crisis so pay close attention to that interview that was james record senior managing director at tangent capital partners author of course of currency wars to now take a head stay right here at capital account president obama is in asia pacific he's stationing u.s. troops in australia but could the next war the thought not with bombs but with

financial weapons we'll hear about the war games that the pentagon brought james rickards in to play but first here closing stock numbers. incident only military mechanisms if you don't work to bring justice or accountability. i have every right to know what my government's doing you want to know why i pay taxes. i would characterize the bottom line as a charismatic version of american exceptionalism. all

right it's time now for word of the day where we break down a financial term or concept for our very smart viewers but just maybe not the financial expert in our audience and today it's very fitting word of the day will be a term its currency war which i was just talking about with our guest an interview you saw with james records and here's another reason why it really matters today

take a look at this poll from bloomberg from an article there this author says we are in the throes of currency war three and ben bernanke he has won the first offensive by flooding china with inflation and now james rickards i've heard argue that that inflation is going to end up coming right back to the united states but that is beside the point what exactly is a currency war let's take a look it is a condition in international affairs we're countries compete against each other to achieve a relatively low exchange rate for their own currency and as the price to buy a particular currency falls so too does the real price for exports from the country so this boost exports and this is where countries competitively deed value their currency in order to do that now arguably the most famous currency war occurred back then during the great depression in the one nine hundred thirty s. this is a. a lot of western european countries and also the united states where this picture

is from they abandon the gold still standard eventually and begin devaluing their own currencies now this is commonly referred to as beggar thy neighbor that is the term now the problem is that fluctuations in exchange rates can have a really negative effect on overall economic activity and this can result in a deterioration of trade relations and a contraction in global g.d.p. so basically that is why many say that currency wars can turn into trade wars which can turn into actual physical wars and that's why you need to know what this means that's a currency war. now as i've been mentioning in the show president barack obama has been traveling through the asia pacific and he spoke to australia's parliament and in that speech

he bowed to expand u.s. influence in the asia pacific region even though of course the u.s. is supposed to be winding down two wars not to mention cutting defense spending now he plans to station u.s. troops in australia and reportedly this is to counter the expanding power of china now you can imagine there's a mixed reaction to this news in the region and just by any talk of china's military prowess let's be real in terms of spending the u.s. spends six times as much on defense as china and it trumps almost the entire rest of the world combined when it comes to defense spending so a bigger question could the next war not even be a military war could it be a financial and who would win that well james records was brought in by the pentagon in two thousand and nine to actually play a financial war game and again he's senior managing director of tangent capital partners and author of the book currency wars and he told us how this game played

out he actually played china he worked together with russia and they went after the u.s. dollar here's what he did. bush has been disadvantaged time and time again they just sort of try to play by the rules the rules of the dollar system but they get into these periodic currency collapses so we were working out you know obviously for the pentagon and they've done many war games over the decades but always you know military invasions arm or whatever this was the first financial working with the only weapons allowed were stocks bonds derivatives the main countries contestants in the war game where the united states russia china and we had another group representing europe and hedge funds my role at the pentagon to have a play word games but they didn't know that much about wall street and my role was to give them that expertise and i actually got to play on the char the team but i recruited a friend to join the russian team and we cooked up a little plot we said the oh let's give the pentagon the money's worth and show them how the world actually works and the plan was to have russia and china deposit their gold in a swiss fold and then create a bank in london under english law the everyone would trust and this bank would

issue currency backed by the gold so you as a country could come put your gold in the vault get this new currency but the kicker was russia and china now say that henceforth they would only accept payment in this new currency they would not accept ours the idea was to try to attack the dollar and you think about it stocks monsters they're all priced in dollars and people worry about the stock market crash but if the dollar crashes every single market crashes with it all of the same times with this was the greatest threat we could imagine and it played out over a couple days it's all described in the book takes the reader behind closed doors of the top secret weapons laboratories where we conduct this sort of enjoy a little bit of intrigue there the start of the book and i hope hope the readers enjoy it i think a lot of intrigue actually i'm quite intrigued because that was in two thousand and nine it's obviously been a little bit it's time and as far as nonmilitary threats we've seen were very public and that's this on something like cyber warfare by both the pentagon and nato that was one of their major priorities when i covered their summit last year

that it's a new priority but i haven't heard a lot of public. either our consideration of death as a threat or as a tactic of financial warfare do you think that the pentagon is seriously thinking about that in a time sense. well not only the pentagon is thinking about it but it's actually part of chinese military doctrine there was a book published in one thousand nine hundred nine by two senior colonels in the people's liberation army the book is cited in my book so if you have my book you'll have the the footnote to point tonight direction where they discuss specifically the financial we're fair as a doctrine and what you're really talking about this is under the heading of asymmetric warfare under strict were fair nobody can really stand up to the united states head to head i mean russia still has a lot of nuclear weapons but in terms of surface police military armor and marines nobody can really stand up to the united states in any kind of head to head combat but it asymmetric warfare if that would be cyber chemical biological radiological financial and other kinds of unrestricted warfare the playing field is much more

level so this is a threat that's taken seriously i do you think in the same way that cyber warfare is and has become more part of their tactics do you think financial wife areas tale . yes something to think about i think cyber warfare is more of an immediate threat we're seeing cyber attacks every day these financial attacks we have financial panics in the market we have financial crises but i'm not suggesting that these are caused as acts of war these seem to be i like to say we should worry about the russians or chinese attacking our financial system we're doing a good job of destroying it ourselves through over leverage and bad regulation by the fed and others so i'm not saying the current financial panic are acts of financial were fair although we are in a currency war and that's a separate thing the cyber warfare is more concerning it's more front and center is happening all around this financial warfare is something that let's put it this way if you were in they say measure war with the united states and you were there were cyber attacks going back and forth why not launch a financial attack while you're at it it's what's called

a force multiplier take the damage you're doing and make it worse it's really certainly an interesting prospect that was james records and his book currency wars is on shelves now. all right we've talked currency wars we've talked trade wars we talk actual wars now let's talk about some business related to legal wars and i have our producer to be sure coping us in studio to help me out as well as shannon john our other producer in the control room to give us your insights as well because maybe remember the story maybe you don't but back in august abercrombie and fitch the clothing company said that they would actually pay the situation as in the

character on jersey shore not to wear their clothing here's a little bit of insight into why. i'm a guy and i know that's just doesn't work like that and i know i know some i know stuff that you don't know so he was wearing abercrombie sweats and abercrombie said that basically that the jersey shore is ruining their reputation and i don't know how that's possible but now this situation has fired back and he's actually filed a lawsuit against abercrombie and fitch saying they infringe on his g t l and situation remarks and capitalize them unfairly capitalize on them unfairly with clothes so what do you think does he have a case here he looks we do this by the weird it looks like some kind of seal or something weird like i just i don't know me but it's just something i notice now i've never seen was sort of i don't actually watch the show i just know these guys are total losers and. i can imagine why i've recovered you would want to associate

with them wouldn't want them to be associated but does he have a case should they be able to capitalize on his or have it praises other people to show any case i think i don't think that they should exist i think the issues go away they should just go away shannon. i mean i see it for entertainment value i. think. but i watch my figure show. i don't know i mean i have a case because obviously it kind of capitalized on like oh we're going to pay you not to wear clothing but to get your baby clothing that was like based on the stuff that he said yeah that is kind of a double standard the thing is i don't know if abercrombie and fitch can really afford this right now i don't know if four million dollars is material i have a feeling it's not but i used to actually cover this company when i was in equity research and i was just looking at what my boss was saying about abercrombie's earnings yesterday and he was saying that they're a total disaster so we're going to get

a situation they have to be as i situation yeah exactly ok let's move on because here is someone else that has a situation so rick perry has touted himself as business friendly and texas as business friendly it's kind of been his whole shtick listen to what he said a year ago though texas ribbon cutting for a chinese company it's called i believe who a i don't know if i'm pronouncing it right but listen to the ribbon cutting. this is a company with a really strong worldwide reputation. really strong reputation and ok here's the situation for rick perry now congress is investigating this company first spy threat saying that they're expanding telecommunications presence may pose a national security threat to the u.s. so i don't know who do you think comes out stronger here greg perry or congress or this company this covers come on strong like a rose it's rick perry rick perry is basically he is he's probably like

a double agent for the chinese because he's the perfect guy you would never expect from texas and go through the like or take something going on you know we remember george bush obviously nixon go to china now it's only rick perry conspire to try and use what we're rick perry to because we've seen all of his core debate flubs all of that the last thing he needs is to have like this being his you know business friendly then sure he's a freak and he's on a slow train wreck for words i what you think you're going to have the right. kind of. i don't know i mean obviously like it's more of a case of you know the governor is like you got this we're going to come cutting you know it's unfortunate that this relation that he's running for president i bet you i bet he wishes that that video wasn't on youtube anymore it's pretty easy to get i would think with the press he would probably wipe that out especially considering there's now an investigation and whether that investigation has merit or not i mean who really knows. they're really moving on the speaking of lawsuits

we've been talking about him north carolina is suing air tran for one hundred thousand dollars plus the private us price of their tickets after they saw something truly disgusting crawling out of arab and say saw cockroaches watch this . that couple says cockroaches coming out of the air branson carry on compartments shortly after takeoff they took these pictures which are now part of their lawsuit i mean it's gross but it is this a classic case of frivolous lawsuits i don't know it's grows or similar but i'm not surprised this is i thought there. it sounds i mean like it sounds like something you'd find like a cockroach and this thing is huge i mean was it this is actual size yes that's real sizes actually the. actual size it could be though they lasted through the dinosaur age. a little flight but come on one hundred thousand dollars this is

a really good case for tort reform even though i know that people sometimes get hurt by tort reform welfare and want to give people a million dollars yesterday was very. not i mean not for cockroaches i suppose if i was playing like i know that the guy is like caught that attention. flight attendant i would have been screaming and you're stuck on a plane man you can't go anywhere about one hundred thousand dollars is going to tell you of that if you are suckers on the floor i would have been upset but i would have never sued come on that's i'm saying. that's it that's i'm saying i'm going to get the final word on that because that's all we have time for that's it for our show so thanks so much for watching please feel free to follow me on twitter at more in the store and give us speed back on the show at youtube dot com slash capital account you can also see anything you missed out there and don't forget to give us your comments and questions because we're doing your feedback now and if you send us a video with your question your brilliant remark and feedback are the best ones so you can put those in the comments of our you tube page as well i'm laura lester and

from everyone our capital account until next time have a great. wealthy british scientists scientists sometimes the title of. the market why not. come to find out what's really happening to the global economy was much stronger for a no holds barred look lobel financial headlines tune into a report.

on. the emission free to critique a should free concert for judges free. range from the free. three stooges high priests. the old free broadcast clothing video for your media projects and a free media john darche dot com. you know sometimes you see a story and it seems so you think you understand it and then he lives something else and you hear or see some other part of it and realize that everything you thought.