a so now is your chance good news to catch up on some of the best of it all so far plus we have a fresh chance to respond to more of the feedback that you've given us on the show now on november thirtieth i interviewed jim rickards he was in studio he of course is author of the very popular book currency wars here is our interview with him. as euro zone leaders scramble to solve the debt crisis that some officials as i said say they have ten days left to figure out finance ministers have been meeting

and they agreed to ramp up firepower of the european bailout fund this is known as the f.s.f. but they said they may have to turn to the i am asking for more help now also coming out of that meeting reportedly italy as it risks of insolvency meanwhile businesses they're coming up with contingency plans for a possible end of the euro that's according to the financial times and enter the central banks with their firehose of dollars to try to put out the fire for now they hope the federal reserve the central banks of canada england japan the swiss national bank and the european central banks have joined forces to essentially bail out the euro for now markets look pretty happy about it today as for what the central banks are doing they are lowering dollar swap rates now this is european banks cheap emergency access to dollars but what does firing off rounds of cheap money do for the global currency war that my next guest argues we are and well

let's find out because we have jim rickards in the studio with us if you haven't read his book i recommend you go out and buy it and do it now it's right there it's currency wars the making of the next global crisis and he's here in studio we are so glad to have you thank you for being on the show you are said to be a great well let's just get right to this so what do you think in your view is this the federal reserve bailing out the euro well what they're saying is this is a masterpiece of sort of perception of reality what they're saying is they will do whatever it takes and substance this wasn't the big deal the swap lines have been in place for years that you have to you're renewed periodically they have to you can be increased periodically there are offsetting ways what the fed does we're going to make it a little bigger i'm going to make it a little cheaper but it was more the signal that said look you clearly are saying this to us clearly there's a run on the back in terms of dollars in the fed said we're going to do whatever it takes a. the substance of it was fairly small but the message was huge which is will do this will do more will increase and if we have to we'll do whatever it takes and that's one of the barges were relieved and that's why stocks went up the main stock

market loves free money yeah they do love that easy money but your said something about a run on banks and it's funny because there were some rumors and speculation of forms article that hey was a big european bank you know not able to get money last night is that why we're seeing this decision from the fed today do you think that there is kind of this quiet run on banks going on and that the federal reserve and other central banks are trying to do anything to avoid well yes it's actually been going on since last summer so it was quiet is behind the scenes it's sunny in anyone's interest to talk about it it was slow but what's happened recently is that the temple has picked up at its. jewish values almost like a central bank unto itself in other words the european banks are afraid to lend to each other but they will lend the door should bankers that's considered to be the strongest private bank in europe in the door if your bank can selectively relend their balance sheet leverage are actually expanding so they look a little bit like a sort of a crazy central bank so yes just and it's a serious problem syria basically a run on the bank a run on dollar liabilities they may be able to fund euro liabilities from european

assurance companies european pension funds but these are dollars many of which come from money market funds in the u.s. and they're just saying look maybe you're ok but i don't want to find out the hard way i'm getting my money out and course the e.c.b. cannot print dollars they can print euro's but for them to get dollars they have to go to the fed so they have a swap line so interesting from the fed's point of view they're looking more and more like a hedge fund they've got longer maturity the u.s. government obligations they've got more euro denominated obligations they're doing it with more and more leverage so the fed is in a very risky position probably technically insolvent at this point in the fed is insolvent sure how going to be insolvent because where they have sixty million of capital sixty billion of capital and about three trillion of assets that are legacy assets if you took the intermediate sector and just mark them to market and the mortgages they've got bear stearns out says if you mark this stuff to marc. you know we don't know for sure if they're nontransparent but there's a good chance that the losses would be greater than sixty billion dollars which would wipe out their capital now they're not going to say that they're not going to put on the balance sheet but that if you march at the market i think that's the

result you would get really interesting now you say that this latest dollars swap announcement is not a big deal in and of itself it is more of a continuation in the perception but what exactly does this do to the dollar in the short term doesn't it put pressure on the dollar isn't it bearish on the dollar well it's sort of a conundrum is very good question are because what the fed the treasury want is a cheap dollar that's the the key to the currency wars who've been trying to cheapen our currency against all the other currencies and yet as much as we want to strong euro the euro still gets in distress so here this is sort of a pretty much of an even swap by making more dollars available in europe it actually should help the european banks to support the euro so it's better for the dollar good well i say better for the dollar the dollar is going down the euro is going up i'm saying since last summer the euro is strong and getting stronger the dollar's getting weaker but that's what the fed wants so you can say it's bad news i think it's bad news from the from the national security perspective i think it's bad for america but it is what the fed wants ok so let's let's stick to this because if it puts downward pressure on the dollar and you say it's

a larger continuation and things have a policy it's also playing into your view of a currency war right can you explain how well because the we have to have a cheaper dollar the theory is we want to cheaper dollars to promote our exports you look at the components of growth what are they it's consumption investment government spending and exports consumption is flat people were up to their eyeballs in mortgage stead student loans credit cards etc that's going nowhere a little bit of investment but not much you're not going to invest if there's no one there to buy this stuff government spending is hit the wall because of the tea party and the deficit ceiling so what's left the only driver of growth that you have left is net exports and the cheapest way to get exports going is cheap in the dollar that's the theory so we can sell more boeing aircraft microsoft software general electric wind turbines a set of the problem is that your import prices also go up with a chew. currency you pay more to buy phones or whatever else so this starts inflation into the united states it's really picking winners and losers that's not really the fed's business but that's what they're doing well and on the flip side

of that you see china now which is easing its monetary policy what impact does this have on the currency war while the shooting back because they're suiting bad they're signed back in the u.s. with that that's exactly why for a long time china maintained a peg no what was happening was the fed increased the base money from eight hundred billion to three trillion all those poor me over three years now i would have said oh that's going to cause inflation in the united states and there are a lot of critics of the fed we never saw the inflation in the united states the supporters of the. full crew were right about that but the problem is our inflation went to china because china had to print their currency to soak up the dollars to maintain the peg now about a year ago china kind of threw in the towel in that the you won appreciate because they had inflation problem in china once they did that that inflation starts to come back to the united states so it is coming back here with a lag so this cheap dollar policy is going to be exact would happen in the seventy's inflation is going to take off and course the losers in inflation are average american savers retirees teachers firemen the cetera the winners are the

you know the speculators and the wealthy who can afford to buy gold or fine art or farmland or they know how to hedge against inflation with average americans it catches them by surprise so i view it as a kind of theft from the average americans for the benefit of the wealthy are being stolen from and exactly exactly going their way and don't worry about what happened in the seventy's and south and it will happen again we're going to see a repeat of history now i just quickly want to ask you because one more question we don't have a lot of time for it because last time we spoke you were talking about how you see the future of the monetary system right as a race between gold and s.d.r. as with this news that europe may be going again to the i.m.f. and saying hey we need your help do you see this as maybe the i.m.f. chance to have a greater role for the s.d.r. in the financial system at this point i do what i see it actually is an acceleration that this is something that you get very. really see it coming but i expect it over kind of three or four years it may be as soon as one or two years now just to be clear in the short run the i.m.f. has plenty of dollar credit facilities to set themselves up as the world bank in

two thousand and eight two thousand and nine two thousand and they want to around the world and got commitments for almost a trillion dollars of commuter credit facilities from everybody now the loans to pay and germany etc they can draw those down there any time issue s.t.r. notes so now for the first time the i.m.f. doesn't just have capital and assets it's got dead it's going to have a leverage balance sheet so it looks more and more like a central bank and when they use us to yours you're exactly like a central back because you're issuing currency so yes that's happening very quickly in their acting like the world's central bank so the i.m.f. is turning into a central bank and the federal reserve is turning into a hedge fund everything is more about six actually right now all right jim rickards i want you to stick around right here there's so much more i want to get to i just really quickly want to explain to our viewers and our word of the day what exactly this reserve ratio business is with china.

right it's time now for word of the day why break down a financial term or concept for a very smart viewer just but perhaps not the financial expert you know not the jim records in the audience and today it is reserve requirements and light of the discussion that i've been having with our guests and also of course today's big news. kind of kicking things off this morning the country bank they're lowering the reserve ratio for banks for the first time back in two thousand and eight it is a move to ease to try to defend the chinese economy from the weaker global outlook and we want to put this ok so this news about the reserve ratio the reserve requirements what exactly are there are they well let's look at him in terms of the u.s. central banking system the federal reserve to explain let's take a look at the definition ok this is the amount of funds that it depository institution must hold in reserve against specified deposit liabilities now depository institutions must hold reserves in the form of vault cash or deposits

with federal reserve banks ok it sounds complex but in plain english this is simply the minimum amount of cash that banks have to keep on hand relative to what they've lent out at any given moment so think of this as representing their reserves what i'm going to show you here ok so this is a bank's reserves say they have a reserve requirement of ten percent so this is their reserves it's ten percent banks can lend out ninety percent then of the money that they have so this has an effect of expanding credit in the economy as you just saw now when a reserve requirement is increased what does it do it forces bends to read big to reduce lending so you see this come down because they have to keep more of that money in their reserves in that pot that you saw down here at the local central bank so they can loan less so what is the effect of china cutting its reserve requirements for its banks as we've just seen them do well in their case it's by

a half a percent and this is basically a green light for the chinese banking system to loan more and create more credit now as they know that is inflationary it tends to put upward pressure on prices but now you know what it is that they've done this with the reserve requirements and what they are. still ahead you've been an active audience watching and commenting on our show asking questions coming up after the break we will respond.

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back in reaction to the fed's announcement about liquidity swaps today we heard from g.o.p. presidential hopeful ron paul he said citizens of the world deserve better than this they deserve sound money they cannot be manipulated and created out of thin

air by central planners who promise printed prosperity now is not the problem is money the problem and could gold play into the solution while we certainly see emerging markets central banks stocking up on countries like mexico russia and venezuela is repatriating most of its gold take a look at the response ok these were the people cheering in the streets literally when venezuela's first shipment of gold arrived from european countries it came home to celebrations on the streets of the return of the country's gold now we have gone a lot of feedback from you the viewer on this topic and specifically about jim rickards thoughts on a lot of these issues so we are going to get a chance to ask him some of your questions again he is senior managing director of tangent capital partners and of course author of currency wars the making of the next global crisis so first mr rickards welcome back to the store and i want to get

to you because there was a little bit of i guess what you could call a back and forth between you and noted economist nouriel roubini on the issue of some of these things the gold standard and roubini said that the gold standard was kind of the cause of the great depression and you disagree in the sense that it was the price of gold if i'm correct so if you know assuming we get the price right why do you see gold as possibly part of the solution. of the problem we have this true or nouriel roubini the problem i had there was that he clearly had not read the book and i don't if you read the book you disagree that's fine i'm always ready to have that debate but he said doesn't jim rickards understand that goes contributed to the great depression well of course when it was tim that i wrote about in the book i said gold was part of the. cause of the great depression but as you say laurent it was not the goal itself was the price in one thousand twenty five the comedian countries of the world went back to gold back to a gold standard at the pre world war one price which was about twenty dollars an ounce the problem is they had doubled the paper money supply to fight world war one

so if you're going to go back to the old price with twice as much paper you have to cut the paper in half that was very deflationary it didn't contribute to the great depression winston churchill was the major architect of that he said later in his memoirs as one of the greatest mistakes he'd ever made. and i put out the book that if we go into gold in one thousand twenty five and say fifty dollars an ounce of twenty dollars an ounce that might have been inflationary and actually avoided the great depression so i was not unaware of the history of this effect i wrote about it so i felt too bad that you know professor roubini actually had read the book before he took a shot at it but that aside in terms of today could we go back to a gold standard the answer is yes but you had the exact same problem how do you get the price right and people say well there's not enough gold to support world trade well there's not enough gold the seven hundred dollars an ounce but there is enough gold at seven thousand dollars an ounce in other words the same quantity of gold will support any amount of underlying transactions depending on the price so what i've recommended is not that we do anything you know immediately but have a have

a commission a bipartisan commission have experts study it for four or five years it took ten years to create the euro from one thousand nine hundred to two thousand and one of study go for a few years and then what would the variables be how would you think about a c i don't know the answer but i think i've got the questions right first we have to define what money every every gold standard is a relationship between paper money and gold so what amount of paper money is zero which is base money is it m one is it and two and two is about six times bigger than m one so that makes a big difference right there then how much gold backing do you need you know the gold bugs say one hundred percent that's not necessarily true great britain rounded with twenty percent the united states right it was forty percent so you've got choices there and then who's in the club is it just us or do you include china you get all different prices to. on the on those are ok but there's lots of questions to be asked here as you know suggesting that there are more looked into and you certainly have our viewers thinking about what a kind of return to a gold standard would look like and someone from new zealand actually wrote to us michael swatch and he did some due diligence he looked at the bank of new zealand

he doesn't believe that they have any gold we look at their balance sheet it doesn't appear that they do and so he writes that he's living in new zealand and if you understand correctly the reserve bank of new zealand has no gold if this is true what would a return to gold standard mean to countries that have little or no gold in their central bank well again that would be something like britain would it was not the case that every currency in the world was anchored to gold the way bretton woods were as your currency was anchored to the dollar and the dollar was anchored to gold and i think in the twenty first century version of that maybe it would be the dollar the euro and the chinese yuan might be three or four currencies sadly for england they know how much gold do they england actually sold most of their gold the two hundred dollars an ounce today it's almost eight hundred all it's very very good friend that was it was a bit of a. chance for the exchequer gordon brown but to be so i think the big three china europe and the us would be in the club and they would be said the ghost of the new zealand and counted than others could then peg their currencies to say the us

dollar with the euro zone so that's how that would work but it's interesting that for fifteen years central banks were net sellers of gold and as you pointed out in the pro segment they become that buyers of those actually a cartel did they get an advance copy of your book i don't know but who maybe were thinking along the same laws but maybe you know it's interesting to me that you know ben bernanke he disparages gold the u.s. has not sold a single ounce since one thousand nine hundred thousand tons stashed away which i think is a good thing for u.s. national security perspective ok and just real quickly we don't have a lot of time for a long answer but one of our viewers wanted to know if you were bullish on silver and said you know you always get asked about gold what are your thoughts quickly on silver silver will tag along with gold i mean it has a hasn't. sure input so it has a little bit so the different price than i was at the end of the day so we will go in the same direction as gold there you go thank you so much for being on the show so nice to have you in the studio go out and read his book it's jam records he is the author of currency wars and we're so glad to have you on the show thank you

thanks for having me. ok it's time now for viewer feedback where i can respond to some of your comments and questions and in response to our interview with jim rickards about the central bank swap lines to get cheap quick dollars to starve european banks as to the question of where this money from the federal reserve goes being q two thousand and ten on you tube asks this who is going to track that and how can you us citizens audit the swap s. and p. moody's l.o.l. well since this interview we did with jim rickards bloomberg came out with this story showing we may not ever know as part of

a currency swap plan active from two thousand and seven to two thousand and ten and revive to fight the european debt crisis the fed lends dollars to other central banks which auction them to local commercial banks lending peak to five hundred eighty six billion in december of two thousand and eight while the transactions with other central banks are all just closed the fed does not track where the dollars all timidly and up and european officials don't share borrowers identities outside of the continent so there is your answer now a spokesman for the e.c.b. responded to bloomberg article saying these banks have a right to confidentiality standard to all banking transactions now a texas republican randy neugebauer interviewed in this story he has the house financial services subcommittee on oversight and investigations was quoted as to whether the u.s. should make disclosure of the recipients a condition of the swap lines and he said you know it's probably a discussion we need to have moving on there was an interesting back and forth

going on on our you tube channel in response to our records interview about the relationship between politicians and the fed old school skills said politicians who allowed these central banks to exist are corrupt i know a rich guy whose daughter spent his money with the credit card he gave her she knew he'd always pay the bills so she had no discipline that lasted through college then he took away her credit card and made. her pay her own bills that's what we should do with corrupt politicians who finance their military pork and the fed now dover lynn responded to this remark saying why would politicians abhor a central bank when they can spend a credit card anyone without taxing to balance expenditures now i wanted to make sure that you didn't miss this comment from a u.s. congressman mick mulvaney talking to federal reserve chairman ben bernanke when bernanke he was testifying on the hill at a hearing october fourth because it really adds to the conversation we're able to

borrow so much money right now at a reduced rate there's a very strong introduce here to simply put off the tough decisions for another day if the interest rates today were at their historical average and the government was paying five or six percent on its money i can assure you we'd be having a lot more longer more serious conversations about what to do about this debt that we're having today but there ya have it politicians love that easy money this low interest rate environment now your at and why k l r writes they have a city called washington and russia russia today from washington well f. and y k l r no they do not not to my knowledge at least r t is an international network america is part of it with programming in the us and we broadcast from washington d.c. from where we are based and where we here at capital count report now where star eighty five said l.o.l. i thought she was going to define derivatives because in michael moore's film some idiotic professor can't define it now those are our viewers' words not mine i don't

know about the professor i can't speak to his character or intelligence but i just wanted to make sure that you didn't miss when we did define derivatives for word of the day here's a snippet. future is a bet on a future price of corn and this is a simple example of a derivative so this would be done to legitimately hedge risk by the people who bought or sold the actual poor like for example that corn farmer or for example coca-cola who perhaps needs corn for their corn syrup the problem is that derivatives have evolved over the years so that people with no vested interest in the underlying asset started to buy and sell these people like this guy trader. now of course you can still see the whole thing on our website youtube dot com slash capital account all of our words of the day are posted there and we had derivatives posted on november tenth of this year and that is it for our show today

thank you so much for tuning in you can follow me on twitter at lauren lyster even though i'm on vacation from the show i certainly have not taken one from twitter also e-mail us your feedback and questions you can do that at my e-mail account ellen lister at r t t v and america dot com or as always you can put them on our you tube channel you tube dot com slash capital account and go check it out because we will be posting fresh content and web exclusives during this break and from everyone here at capital account happy holidays and have a great night. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything you thought

you knew you don't know i'm charged welcome to the big picture. wealthy british soil of the sun. is no time to write for. markets why not. come to. find out what's really happening to the global economy with my stronger or no holds barred look at the global financial headlines tune in to conjure report on our. if. he is eve he. he he comes. to eat.

some. folks. will go into the featuring science technology innovation all the latest developments from around russia we've got the huge earth covered.

do you know who's reading your tweets tonight a look at how the u.s. government uses social media to keep tabs on you and is this more evidence of the growing role of big brother. raul or. using drums their voices or whatever they can people are taking to the streets to have their voices heard we've seen it with the occupy movement here in the u.s. and also on the streets of moscow tonight we'll compare the two movements and ask is this democracy at work this year we have we have.