In this episode, Max Keiser and Stacy Herbert discuss the Bobo and Gono global central banking clown show featuring Ben Bernanke and Gideon Gono and their crowd pleasing echo bubble gags and hyperinflationary squirting money printing flowers. In the second half of the show, Max Keiser talks to Jim Rickards, author of CURRENCY WARS, about Ben Bernanke’s speech in Japan where America’s chief currency warrior warned emerging economies to appreciate their currencies or suffer inflation. Rickards also notes it could be the first time the head of the Federal Reserve has ever talked about the US dollar, normally the domain of the US Treasury.
Guest post via Gold Silver Worlds.
People tend to forget quickly and fail to learn from history. As George Bernard Shaw once said : “What we learn from history is that people don’t learn from history.” So it’s worth one’s time to look back to the past and learn what others before us learnt sometimes the hard way.
As far as Gold’s role in our monetary system is concerned, the most recent learnings and insights come from “the Bretton Woods period”. Apart from being a nice resort in the mountains, Bretton Woodsstands for the agreements that created a new world monetary system in 1944. Courtesy of Scott Minerd, chief investment officer of Guggenheim Partners, who wrote the short but very powerful paper (bottom of this article), full of insights from monetary history. The learnings should be used by all of us, including our economic and political leaders.
Scott Minerd writes:
The early success of Bretton Woods, which relied upon weak currencies to successfully promote exports looks surprisingly similar to the policies being practiced by central banks around the world today. Some have referred to the current policies in foreign exchange markets as Bretton Woods II. Although not officially acknowledged, central banks are once again tacitly pegging their currencies to the dollar. As the U.S. is expanding its monetary base through quantitative easing (QE), other countries have few options but to join this race to the bottom. This situation is as unsustainable today as it was in the 1960s.
Gold was an important component of the Bretton Woods system. As a monetary anchor, it provided stability for the dollar as a global reserve currency. With the demise of gold convertibility under Bretton Woods, global price stability began to unravel. After being depegged from its official price of $35 per ounce in 1971, gold rose by more than 2,000% over the next 10 years. Investors migrate to gold when currencies no longer function as good stores of value.
Weekend must watch videos with James Rickards, author of Currency Wars, is calling for $7,000 gold! Courtesy Future money trends.
Not many of the investors in this market do understand what is going on. With the new normal of central planning, few seem to understand we are entering a more intense period in the currency war era. Countries will fight with their currencies in order to improve the competitiveness of their countries. Watch Japan carefully as “everybody” knows Yen is going only one way. What if this is wrong, and we get a massive move in the “wrong” direction? Don’t forget, if rates in Japan rise to 2%, the interest rates expenses will be larger that the total taxes Japan receives. You wouldn’t run a household that way, or? From Caixin.
Japan is on an unsustainable path of a strong yen and deflation. The unprofitability of Japan’s major exporters and emerging trade deficits suggest that the end of this path is in sight. The transition from a strong to weak yen will likely be abrupt, involving a sudden and big devaluation of 30 to 40 percent. It will be a big shock to Japan’s neighbors and its distant competitors like Germany. The yen’s devaluation in 1996 was a main factor in triggering the Asian Financial Crisis. Japan’s neighbors must have a strong banking system to withstand a bigger devaluation of the yen.
Japan’s nominal GDP contracted 8 percent in the four years to the third quarter of 2011, and six percentage points of that was due to deflation. Without increased government expenditure, the contraction will be one percentage point more. Japan has not seen this kind of sustained deflation since the 1930s.