James G Rickards is the senior managing director of merchant bank Tangent Capital and a regular guest on Bloomberg and CNBC. I first got to know Jim Rickards through his regular interviews with Eric King on King World News and extremely enjoy his analysis and knowledge. He has recently been talking about currency wars and most people can easily see the huge swings in the value of currencies against each other since the collapse of 2008. I had been paying attention to the exchange rate between the US and Canadian dollars since they went 1 to 1 for the first time in 2007, but I never thought to delve into finding out what decides the value of a currency. In a currency war, various currencies like the US dollar, are devaluing themselves by money printing and having low interest rates, which exports inflation to other pegged-currencies like the Chinese yuan, as well as causing hot money (money that flows regularly between financial markets as investors attempt to ensure they get the highest short-term interest rates possible) to travel into currencies that choose not to devalue. But these currencies that don’t devalue begin to have a huge flow of capital into them, which ultimately they cant control, resulting in the devaluing of the currency. So the result of the war is that currencies are fighting to devalue themselves until they reach their true worthless value of zero. The most recent victim has been the Swiss Franc, as the Swiss National Bank (SNB) decided to peg itself to the Euro, which resulted in a devaluation of the Franc by around 10% and it loosing its safe heaven status. The Swiss Franc was the last currency to depeg itself from gold since 1971 and only did so in 2006 in order to join the IMF. Well Jim has been working on a book entitled ‘Currency Wars: The Making of the Next Global Crisis’ that will focus on what he believes will be the upcoming crisis, including its origins and how its happened.
I have enjoyed listening and watching Jim and my favourite quote from him can be found in the above CNBC video, wherein he says [6:05] “The problem is, when you own gold, you are fighting every central banker in the world. Central banks hate gold as it limits their ability to print money. But the market is the market. The market will do what it wants. The central banks are not bigger than the market. … they are just trying to prevent an unstable decline of the dollar. What they want of course is a stable, steady decline.”
Those who wish to following Jim Rickards can do so through his twitter feed, video interviews, and audio interviews. A number of his most interesting King World News interviews I’ve heard have been about the US Gold Reserves and the Cancellation of the Gold Window.