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Dollar Reaches Pre-Avalanche Moment; Gold $7,000, Jim Rickards

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Posted by on Sep 21, 2012

 

Speaking with Max Keiser’s On the Edge, Currency Wars author Jim Rickards says, the collapse of Lehman Brothers and the Fed‘s response to the crisis convinced China to no longer trust the United States and the dollar-based reserve scheme.

In the past, the thinking among the world’s central banks focused upon the dollar as an anchor for relative valuations of other currencies trading against it. That was a bad idea, according to Rickards.

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“We trust the United States to maintain the value of the dollar, so we’ll anchor it [other currencies] to the dollar,” he says. “That trust was misplaced, beginning, really, around 2010.

“The United Sates decided, as a matter of policy, to trash the dollar. The Chinese made one enormous blunder; they actually trusted the United States to the tune of $3 trillion of assets to maintain the value of the dollar.

“China’s learning the hard way that you really can’t trust the United States anymore.”

After that breach of trust, following the Fed completed round of its first QE program, it became clear to the Chinese, according to Rickards, that the Fed intends to devalue the world’s reserve currency and the $3 trillion of U.S. paper it bought as the mechanism of maintaining a competitively cheap yuan against the dollar.

“The Chinese, you know, they don’t want to be the suckers at the poker table. the United States put enormous pressure on China to allow the yuan to appreciate a little bit against the dollar, which it did in 2011.”

Since then, evidence shows the PRC has responding to the Fed through drastically stepping up central bank gold stock at the PBC. But, in the meantime, the race to the bottom of the currency graveyard for the world’s major currencies will continue until that fateful day, when the global system is forced into a ‘big reset’ to another currency regime.

“These things [global currency devaluations] can go on, as I’ve show, historically, for 10 or 15 years,” says Rickards.

“Nobody wins. All get is, either, global inflation or contraction of world trade if the currency wars turn into trade wars,” he adds. At some point, “the system breaks down.”

But, “we’re some years away from that. These currency wars will continue,” he says.

When Keiser likens last week’s Fed QE3 announcement to a “pre-avalanche moment” for the dollar, Rickards agrees.

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    • Paveway III

      It really has little to do with ‘trust’ on the Chinese part. The corrupt psychopathic leaders are maximizing their profit on the slave labor they created – they’ll take anyone’s currency. Any gold they’re buying is subject to pilfering by the rich and powerful Chinese. The average Chinese will see little of it (if any). In the mean time, the average Chinese can’t enjoy the profits of their labor – most of it goes for food and housing.

      While they can surely see what a Ponzi the USD represents, the PRC leaders are really no better themselves with the RMB. They’re just using old-school manipulation methods vs. the Fed’s baffeling schemes.

      And I saw yesterday that they are once again the largest holders of U.S. debt and have continued to buy MORE the last six months. What else can they do with all that USD from the trade imbalance?

      Greed is always self-destructive in the end, and the pain get’s transferred to the average Joe.

    • ElOregonian

      From Treasury Bonds to exchanging Bombs. These psychopaths/Luciferians/Cabalists have really screwed things up, now haven’t they? Off to the Stockades with them.

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