one of the problems we're going to have in the global economy is currency devaluations that's the solution for an individual country for the issues they are facing right devaluations against what well just nine hundred seventy one when the gold window was closed everyone's been trading against each other so now as recognition that everyone is devaluing against against what well there is only one answer to that they will have to come back and say we're all going to devalue against gold just like they did in the 1930's and that's what's happening anyway because people in china people in asia people the middle aged people in the emerging economies are buying gold hand-over fist the physical gold because they realize the devaluation is coming it's coming they're not stupid only the people of america and the u.k. are stupid enough to think that there won't be a return to a gold standard well we're drowning in central banking because all central banks are mimicking what the federal reserve and the japanese central bank are doing because they have to because they're all drowning in the liquidity provided by the

u.s. federal reserve and the bank of japan in global currency war a new front opens in the south pacific from way down under comes a new front in the push and pull over world currency values stung by the rise in the new zealand dollar affectionately known as the kiwi the country's central bank last week acknowledged that it had intervened and foreign exchange markets to try to fight any further appreciation yeah this is the global currency firing squad all the currencies are lined up in a circle. they've got their currency print button ready to go and they print print print and they're all trying to devalue concurrently so that nobody is the loser however that is like warren buffett says when the tide goes out you see who's not wearing a bathing suit in this case it's going to be japan so japan will be the country that shows up as the one that enters into

a hyper inflationary spiral and of course this is the allocation of time energy and capital we're spending so much time on micromanaging exchange rates essentially around the world and very little time actually dealing with all the essential problems with our economies why we have these crises number one is all of the fraud all of the banking crimes going on and our manufacturing base has been eroded so none of that is being dealt with because all of our energy is spent micromanaging for x. markets you know look at the housing market people really don't buy houses anymore they speculate in the housing market and they tracked mortgage rates and tracker rates and they fall fed policy they're not buying homes they're just speculating in the housing market look what's happened to the health business the health mark in america they've introduced these exchanges where people have to go buy and borrow money then they have to go trade speculate on the health exchange to find out where

the best deal is any given moment is great for health exchange brokers and health insurance companies in exchange brokers will be making outlook lots of money but people are not going to get health care as a result of it people are getting the debt on their housing they'll be in debt for health care look at education market people don't get an education anymore they speculate education they borrow money they figure out well why borrow two hundred thousand dollars to go to this school or that school why get the money at the tail end when i graduate going into business as a professional speculator at a bank on wall street well i met my game that i made speculating on my education began with my borrowing about money to borrow. whatever the education brown one of the health care of our money for my mortgage i borrow money for my day to day shopping my consumers don't have proper nor borrow money low interest rates of thought to speculate is great for the people who sell the speculative tools on wall street in the us the world of cheap money but the underlying con is getting rotten to the coors dining well that's actually mimicking what's bill gross says also in this article referring to quantitative easing and the stock price is booming of

course and a lot of people celebrate that and i think that's a good sign and maybe hopefully one day it might trickle down to a job but by venturing deep into experimental policy territory they meaning the fed have inserted a remarkable wedge a disconnect between market prices and underlying economic and financial fundamentals he wrote the only thing that's going up is volatility the fact that the dow jones is at fifteen thousand it done underlying doesn't indicate underlying economic strength it indicates heightened volatility and more program trading and i frequency trading so you'll have now going forward of this year next year you'll have a dow jones at fifteen thousand then it will be a ten thousand then albeit twenty thousand that will be a fourteen thousand that'll be a nine thousand that will be seven thousand so the it will be you're living in such a quake zone it's an economic earthquake zone you're building your house on the edge of a volcano just because occasionally in the course of the volatility is that a new high level to indicate underlying economic strength that indicates underlying

economic heart attack and you know we often mention we're in a financial war jim rickards says we're in a currency war which is part of this financial war and of course when you're in a war nations and groups of nations often you know put all their resources into one area which does gain and in this sort of financial war it's the stock market the stock market benefits from the financial war on the currency devaluations britain is booming questionmark footsie reaches a twelve year high as record looms index rise. as to levels last seen before dot com bubble burst fueled by a relatively calm euro zone q.e. low interest rates and rising confidence in japan obviously that lists cause that rise in the footsie nothing about the underlying economy and now this huge glut of hot money in the global economy is a rat passing through a snake and sometimes that rat through

a snake it'll look like stock market and then the stock market will crash and then the raft through the snake will be zero dot com crash oh housing crash new stock market bubble oh new housing bubble like george osborne to do ponzi scheme the creating a new housing bubble that's the new rat through the george osborne snake right so we just see the rats through the stink of this glut of hot money financed by ultra low invisible and close to zero interest rates orchestrated by the such a bunch of the world who of course are making money hand over the fed by corrupting the system yet we're swimming in central banking and this is regarding this footsy reaching twelve year highs investors are betting that central bankers including the bank of england and the us federal reserve will continue their attempts to boost the global economy by printing money and keeping interest rates at historic lows the buoyant stock market may take some of the pressure off george osborne as he tries to persuade voters that his emphasis on public spending cuts to reestablish

confidence in the economy is working here's the new good analogy it's a game of monopoly and as players go bankrupt the amount of money that you get free when you pass go is increasing so instead of just getting two hundred dollars and if you're getting two hundred billion dollars if you're the city of london but all the while people are going bankrupt on the side because they can't afford the rent or the rent the red seeking that's going on within monopoly you have a bad economy and monopolists and old looked up a list and kleptocracy. see as tz and you don't have any real underlying growth all those pieces on the board for social services social security health care those types of things are all going out of business except for one notable exception the prism well actually so if you're comparing it to monopoly monopoly works because everybody sitting around the game board is given equal amounts of money with which to buy up the properties here the central bankers in which we're drowning they give

they feel that if they give certain guys like lloyd blankfein and jamie diamond one hundred billion that they're going to let it trickle down to the other players just like the other players start with nothing or actually negative nothing they have debt they're given and they have to try to get jamie dimon to convince them to possibly give it to them it would be good if it were like monopoly in that you had a fair shot you know you threw the dice in monopoly and based on the throw the dice you land in different real estate and you buy or not buy that real estate and it's really up to chance but here the dice is loaded because as you mention a jamie diamond or lloyd blankfein they will loaded the dice they always win as they go around the board and they went up was the highest rent seeking properties imaginable they also convinced the bank that every time they pass go they get a bigger and bigger free injection of zero percent interest rate from the bank from

the central bank from the federal reserve from the e.c.b. so they're really gaming the system into very important ways they're bankrupting all the competition and they're gaming the central bank to give them billions and billions of free money that's why so many people are starving to death that's why it's an economic financial hole of cost as paul moore former boss regulator has pointed out one hundred million people thrust into poverty because of this gaming of the system and rent seeking around the but hopefully board that is the city of london and wall street so that i am half has noted that they're concerned that every. single central banking government most seem to be following the us federal reserve and the bank of england and the bank of japan and money printing but they do recognize that this seems to be the only response for some of these highly indebted nations so in the u.s. you have congress people now pressing for their pressing harder now to pass legislation to punish currency manipulators which is very bizarre considering that

they're the chief for and in this global currency war they're trying to outlaw anybody else possibly doing it in particular china but the us has the same their second largest deficit is with trading deficit is with japan so to date japan has been given a pass on this monetary policy which involves massive asset purchases by the bank of japan and a doubling of the money supply while that almost necessarily impacts the country's exchange rate as with anything else increasing the supply of yen lowers its price as expressed in terms of other currencies it is also taking place in an environment where every other major central bank is doing the same right well the japanese yen is a funding currency you can borrow against it you can sell it short and the chinese is not a funding currency there's not liquid enough you can borrow against it it's not on the wholesale currency market the way the japanese yen is and america and britain have colonized japan japan is not a free sovereign state it's

a colony of the city of london and wall street to use it like a toilet to dump all their risk all the pension funds in japan now own all of the risk of the west that's now exploding in their face and they're all going to retire oh sure they live two hundred twenty years old because they eat all that sushi but they want to duplicate the end to rub together because wall street bankrupted you mrs watson ah but you fricken chump. all right stay here but thanks so much for being on the kaiser and thank you max stay to have a second half well be speaking to jim records. well. out of sight but still on our minds from the still exceeds the norm let's try to live smarter with smartphones you never know what some people are hiding things can be sure to prove down to the molecular level learned that what the doctor

ordered is often based on secrets under our skin let us shine the light on a kid in a world. we've got the future of coverage. sublimate

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welcome back to the kaiser report imax guys are time now to go to new york and speak with jam records for part two of our interview he's the author of currency wars jim rickards welcome back to the kaiser report thank you max all right jim record wall street loves quantitative easing but in the rest of the world economists and policymakers in emerging economies believe that q.e.

is an act of currency war that will ultimately lead to a military confrontation your thoughts is a hot war possible. well how it was possible we may get one without quantitative easing just looking at what's going on in the middle east but coming back to the global situation you write about quantitative easing we are on a currency were a lot of people looked at what the bank of japan did in december two thousand and twelve and now into two thousand and thirteen with their massive you know one point four trillion dollar equivalent quantitative easing and said oh my goodness from the currency where we'll know we've been in the currency war since two thousand and ten this is just the latest battle i like to say you know words are not continuous fighting all the time there are big battles and they require peers who come through a quiet period now we're back in the other one of those big battles but it's interesting how the intellectual superstructure has evolved that what bernanke he's saying is saying this is not a currency war they look back at the one nine hundred thirty s. they see the problem with the one nine hundred thirty s. is you had sequential devaluation so in one nine hundred twenty one germany one nine hundred twenty five france one nine hundred thirty one england one hundred

thirty three the u.s. and so on they they sort of took turns to say why don't we all hold hands and jump out of the airplane at once in other words if the if japan and the u.k. the u.s. and the e.c. be all east at the same time under bernanke he's theory you'll get the stimulus but you won't have a currency war because they're all printing at the same time in theory the relative values the cross rates the terms of trade a comparative advantage shouldn't change very much just as everyone gets ease or not he came up with a new name for this instead of beggar thy neighbor he calls it a rich neighbor there's only one problem with actually the law he's theory one of the problems is the c.b. one place i think the u.s. u.k. and japan are on board with the c.p. is not but believe in that one side it's still a currency worse if you have the gene for against the g. sixteen there's still losers just because the u.s. japan u.k. and maybe the e.c.b. agree on something the losers just south korea australia taiwan thailand china brazil switzerland all the other countries in the world so g twenty all against all

it's sort of two sides to four against you sixteen so it's still a currency war you're still going to see pushback and what we should. expect from this is inflation but remember you know as milton friedman said inflation comes with a lag so it doesn't mean just because people are pretty good inflation the next day the other things have to happen behavior has to change in velocity as to increase as we've discussed. reports from the recent meeting of the brics brazil russia india china suggest they are ready to dismantle the dollar system do you see this happening max the brics they want to and the dollar system without it's likely in the share on what they're more likely to do is start the beginnings of an alternative system but it's important understand these things take years you can't just snap your fingers and have a new currency actually you can have you can take a currency make it a trade currency very easily china is doing this with the you won they have bilateral agreements with brazil and some other countries that's just a matter of keeping score you can have you can use bottle caps as a trade currency just means you keep score and you buy a lot or trade surplus or deficit and settle up every now and that

a reserve currency is something different to have a reserve currency you have to have investable assets and what are reserves reserves your savings it's your surplus is the amount of money you make who trade surplus and direct foreign investment and other sources so you have to invest it in something that means you need the bond market you need all maturities from thirty days to thirty years you need repo you need clearance the settlement you need financing futures options dealers there's a whole network of things you need to have a reserve currency right now the dollars got it the euro has it to some extent but they actually don't have that much of a problem with europe is you have a bond market but there are all these individual sovereign so you know you got to pick italian bonds or greek bonds or spanish bonds some of those are not too attractive this is one of the reasons why they are had a true euro bond market backed by the full weight of the euro zone that would be an alternative to the dollar because now the bond market would be a lot deeper but we're not there yet as far as the brics are concerned they don't have anything like it but they are beginning the process you're right about that setting up a bilateral lending institution setting up

a clearance and payment system that's important by the way because right now a lot of the u.s. you know we get away from economic of the. and since two military events and get away from currency wars into financial wars the us uses the clearance of payment system in part to control behavior of countries around the world though which is what they did to iran they kicked them out of the payment system so iran's had to resort to barter and different kinds of fraud and alternative mechanisms if you have your own payment system you can get around that a lot so it's worth it's worth watching it's a significant development but we're not going to see the end to the dollar gemini any time soon if we do it won't be a brit currency it will be the i.m.f. in the s.t.r. i saw a headline jim that the indian finance minister is begging its citizens to stop buying gold your thoughts good luck with that i mean the indians have been buying gold for you know over two thousand years they're going to they're going to keep keep doing it and look if they you know they put on a surcharge or something that might slow down a little bit but then that's just invites smuggling so i don't think that you know

the indian government may jawbone a little bit of the end of the day the indians are going to have their gold by the way it's one of the interesting sort of bifurcations in the world we see it's called the paper gold market you know comics gold london bullion mark association with their unallocated gold gold forwards their price has been coming down very steeply and yet people are lining up around the world to buy physical gold now there are two different prices you know the price is more or less the same but we're seeing a huge demand for physical go we're seeing spot shortages so. as i described this is gold leaving the weekends who have the leverage players the hedge funds the floor traders the speculators going to the strong hands who are the individuals and the central banks so strong it is kind of a barbell you have the russian chinese central banks other central banks and then every day people around the world who are lining up to buy gold so interesting bifurcation there right where the london billion market association here in the u.k. or the comex market of course uses leverage fifty to one hundred to one to keep the price of precious metals level that they want to keep it at where is the physical

demand around the world is jumping into what point does the physical demand overwhelm the paper more. and secondarily the question is your magic number for china when they get to four thousand tons from the stated reserve of a thousand and fifty tons how close are we to that and when that news breaks what can we expect well we're getting closer but we're not all the way there are of course china. doesn't is not transparent about the amount of gold they have officially they say they have a little over one thousand tonnes through various sources i think we can put that number significantly higher at least two thousand tonnes perhaps three thousand tonnes not clear exactly where that is but what they have to do they have to get to a ratio of sort of gold to g.d.p. that puts them on a par with the united states that number is actually a moving target because their g.d.p. is growing so fast but it's at least four thousand tonnes perhaps higher so they're probably still a year away what i would expect is that maybe early two thousand and fourteen mid two thousand and fourteen the chinese will say you know hello world guess what we

actually have four thousand tonnes we haven't told you for the what we've been doing for the last five years but here we are that's a significant significant development because that means at that point if the price of gold goes up significantly china is not left in the dust right now they would be you know if you think of gold relative to g.d.p. russia has enough gold the eurozone has enough gold the united states has enough gold china does not china would be the big loser if the price of gold were to to rise significantly so so most of the world's trying to keep a lid on prices until the chinese catch up and then once they're there the price can go up significantly because the chinese will not be angry and will not be left behind so that's one of the big plays going on and so the international monetary system of the world gold market you have a gym follow up on that a little bit because i'm hearing anecdotally that's exactly what's going on is that the door is being held open for the chinese that these attacks on paper gold price are a way to allow china to accumulate this four thousand or more tons of gold which will void at some point having to have a global devaluation and a new brand would style

a kind of global confound cetera that. this is an easy way to according to some to get to that point by artificially keeping the price cheap they're allowing china to accumulate and then once they get their four thousand tons then everything devalues against gold when there's some kind of currency harmonization going on that's what i'm hearing you're suggesting that that's what's going on can you talk a little bit more about it i think that is what's going on max what's interesting is who's who's behind it knows everyone wants to blame the fed for suppressing the price to go well maybe i mean there's really nontransparent maybe it's the chinese and by the way if the chinese are in the futures markets you know putting in massive sell orders good luck to the see if t.c. try to investigate that you're not going to get the information out of the chinese i mean they can barely keep up with the insider traders in the united states they're not going to get anything out of china so china can do it pretty much with impunity and maybe people don't want to ask too many questions anyway but but you know you can have

a bretton woods style conference right now because the chinese don't have enough gold when it's like a poker game when all the players sit down at the table everybody wants the same big chips china doesn't have enough chips to play right now you know remember between one nine hundred fifty and one nine hundred seventy under the old bretton woods system u.s. gold reserves went dropped from twenty thousand tons to nine thousand tons where the eleven thousand tons go well went to our trading partners three thousand to germany two thousand to france two thousand italy five hundred to the netherlands cetera so flash forward thirty years china's now the trade superpower they're running the surpluses but they're not getting any gold they're just getting you know funny money from the treasury so they sort of woke up to that realize that they're the suckers of the poker game they've got to get the gold to be a player but they're not there yet so i would expect the price of gold to go sideways you know in dollar terms anyway for through the remainder of this year and then eventually it'll go higher once the chinese have enough gold that's if the inflationary scenario plays out as the fed wants it to but remember if deflation takes hold that's a completely different scenario there the nominal price of gold could go down

although everything else will crash around and go could actually do relatively well . both on a relative basis and on a real basis if you get serious deflation but then it's just a matter of time before the fed steps and says we're going to raise the price of gold because we've tried everything else and we cover a zero printed money currency wars operation to twist q e one q e two q e three forward guidance we've done everything nominal g.d.p. targeting we've done everything we can get inflation there's always one way to get inflation at the end of the day which is just to charge the dollar against gold that's when gold goes up because the market takes it there because the fed takes that there because they're desperate to get inflation and i want to keep on this trying to theme for a second because china is the biggest miner of gold they're the biggest importer of gold and of course jam records i mean your resume is quite impressive because you were working with the government to do the long term capital management work out you were working on the iran contra scandal days with the government in

a very high level type of operation euro currency wars where you're playing games at the pentagon currency war games of the pentagon who would win who would lose so my question to you is what is it possible from your vast experience for china to do what you just said it could be doing manipulating futures contracts manipulating paper markets to give them a way to get that four thousand tons of gold how how reasonable is that jim well it's certainly possible i don't have a direct proof that there been there pilate in the market but i do know two things well actually we know a bunch of things number one they are the world's largest gold mine or you're right about that they are the world's largest gold importer well the fact that they're importing gold tells you that none of the money output is being export of because why would you import if you're exporting so the keeping all the gold they're producing domestically they're importing gold they're acquiring gold we know they're nontransparent about that by the way they've done this before if you look at the five year period from two thousand and four to two thousand and nine they accumulated four hundred tons but didn't tell anybody they just woke up one day in

two thousand and nine and said hey we have you know now we have a thousand tons the doing the same thing now. well you know five years on it would be child's play to step into the futures market simulate those markets there's no way the sea of t.c. could force anything against them because they're a sovereign power they're not going to you know answer a subpoena that they were left in the sea of t.c. so are they actually doing that i don't have direct proof for that but i know it's possible they have the motivation to do so you know when you're trying to solve a crime you look at a suspect the first thing you say is what's the motivation the chinese have a big motivation to keep the price of gold low until they acquire all they need. all right well as always it's in record time flies right a time on this part to this interview we got to think about thanks so much for being on the kaiser report jim rickards. thank you max all right that's all the time we have for this guy's report was made max kaiser and stacey herbert like to thank our guests author of currency wars if you like to send us an email please do so at kaiser reported r t t v dot are you until next time i've got the same bio.

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