THE GLOBAL FINANCIAL
DEATH SPIRAL?
PART 2
PART 2
By
Kristie Pelletier and Michael S. Coffman, Ph.D
August 27, 2013
NewsWithViews.com
August 27, 2013
NewsWithViews.com
http://www.newswithviews.com/Coffman/mike140.htm
Part
II—China, Currency Wars and the U.S. Dollar
“For
the first time in human history, the entire global economy relies on
a paper currency – the U.S. dollar – which is not linked
or backed up by any reserve commodity (such as gold). Around the world,
roughly 60% of all bank reserves are U.S. dollars... Its standing as
the world's reserve currency permits America's leaders to do what no
other country in the world can do: legally print money to repay debts.If
confidence in the dollar were to fail, what on Earth could be used to
stop the panic? There are no reserves.” -Porter
Stansberry S&A Digest, June 1, 2013
The
world is increasingly unstable economically. Europe is technically bankrupt
and can never repay the huge debts it is accumulating except by currency
devaluation (i.e. inflation or hyperinflation), which in turn, can have
a domino effect on the United States (U.S.). However, no nation threatens
the U.S. as greatly as China. Even while China reels from its own debt
problems, it is systematically attacking the U.S. through a currency
war and undermining the U.S. dollar as the world’s reserve currency.
Very few people understand that if China is successful, it will instantaneously
make the U.S. dollar worthless.
Sovereign
entities as well as various terrorist groups have already seized the
opportunity afforded by the current world economic situation to hit
us where we are most vulnerable. It is to be expected that nations will
move for their own national security and interests first. Some do so
with only slightly veiled belligerence. It is no secret that China has
been aggressively and actively positioning itself to move to the top
of the proverbial food chain.
China
In
a report by the FBI in the summer of 2012, it was revealed that
China has already negatively affected American industry through the
theft of trade secrets. Companies’ own employees are recruited
to do the dirty work. This is continual and pernicious problem within
American companies whether they are doing business here or elsewhere.
Additionally,
American products are sold to companies in countries with whom we do
business, and then are resold to nations where we legally cannot do
business, like Iran. It’s all a lot to grasp, but simply put,
an American soldier may be serving his country in Iraq and be killed
in an attack coordinated with radio parts made by American companies.
So many facets to this kind of warfare… and we are woefully vulnerable
to all of it.
China
has its problems too – major problems. In its drive to conquer
the world economically, China would have the world believe that it is
prospering in some kind of unholy free market/communist mutation. However,
they can’t have true free market while they are still perpetrating
heinous social and economic human rights violations against their people
and imprisoning and torturing citizens for even going to a Bible study.
Social repression ultimately translates into economic suppression.
When
it comes to China’ seconomy, things are not as rosy as the government
of China would like the world to believe. China’sdebt is far worse
than they earlier reported. In late June, 2013, China’s
seven-day repurchase agreement rate between banks shot from 3.3
percent to as high as 30 percent. It was an unparalleled credit crisis
for China. If banks can’t inexpensively borrow from other banks
on a short term basis, the economy grinds to a halt.
Robert
Wiedemer, a managing director of Absolute Investment management, reports:
“For
years now, the Chinese growth engine has been dependent on increasing
amounts of debt and part of it is from its so-called shadow banking
systems — analogous to the burgeoning sub-prime mortgage lending
market in the United States during the housing boom. Much of the shadow
banking debt is short term and much is invested in empty real estate.
Its ratio of total debt (public and private) to gross domestic product
in China has risen from 148 percent in 2008 to 205 percent in 2012.”
The
economic growth of China since 2008 was heavily dependent on rapidly
increasing debt created by printing
money out of thin air similar to the
Quantitative
Easing by the U.S. Federal Reserve. There is no better example of such
waste than the ghost cities built in China with the enormous amounts
of money created by the People’s Bank of China in the wake of
the 2008 crisis. The ghost cities were built with the two or three trillion
dollars of money printed by the Bank of China. These cities are large,
and have a great infra¬structure, but no one lives there. They have
become costly monuments to the horrendous waste that unbridled monetary
creation generates.
China’s
June crisis hit the headlines for about a half a minute and then disappeared
as the Bank of China printed even more worthless yuan. Morgan
Stanley reported that China’s growth rate is only half of
the 7-8% that they claim. Some analysts are skeptical that it is even
half. It might even be less than zero. China
has finally admitted they simply don’t know how much debt
local governments have created since 2008, when the debt stood at 10.7
trillion yuan. Fitch
Ratings has warned that wealth products worth $2 trillion of lending
are in reality a "hidden second balance sheet" for banks,
allowing them to circumvent loan curbs and dodge efforts by regulators
to halt the excesses.
The
Third Currency War
China
is stockpiling gold in massive amounts. They are purchasing 100% of
domestic production of gold, and they have imported 750 tons of gold
in the past year. That is over a quarter of global output. Some believe
China is positioning itself to back its currency with gold. Which will
hold more power;the debased U.S. dollar, or a gold backed Chinese yuan?
The only thing that may derail this effort is if China’s debt
were to be exposed as orders of magnitude greater than they are admitting.
That would potentially neutralize the yuan’s advantage over the
U.S. dollar.
Many
financial experts, intelligence officers, and even the FBI believe we
are not currently in a place where we will withstand a well-organized
attack on our economy. They are warning of the potential of an all-out
currency war. The
FBI has already claimed that the cold war is not over but rather
has merely moved to the global marketplace in the form of economic espionage.
The FBI prioritizes counterintelligence to fight this growing threat
second only to counter terrorism efforts. It is become frightfully clear
that these two threats are inextricably interwoven.
China
is not alone in its dreams of being the world superpower. It is very
likely that those seeking to destroy our nation as we know it and settle
America for Islam will use economic terror tactics as a major weapon
in their arsenal. A simple recipe of the theft of trade secrets mixed
with cyber espionage; throw in a pinch of criminal big bank money laundering,
and add global currency manipulation, and there you have all that is
needed in the right hands, or better said, the wrong hands, do very
serious harm the economy of the U.S.
In
its most basic form a currency war breaks out when nations begin to
internationally devalue their currency against each other to supposedly
help boost their economies. However, James
Rickards, economist and security advisor to the Pentagon, CIA and
the Director of National Security cautions:
“The
flawed logic goes like this, if you make your currency cheaper, [it]
makes your exports cheaper. It also theoretically makes your country
more appealing to foreign investments, since foreign currencies now
buy more inside your borders. And the powers-that-be figure that'll
solve a floundering economy. History has shown this not to be the case
time and time again.”
What
it does do, however, is make the debt you repay to other countries worth
less. Not surprisingly, this angers the countries to whom you owe money.
They then devalue their currency in retaliation. Rickards, billionaire
Steve Forbes (Forbes Media), Bob Wiedemer, economist and author of NY
Times Best-Seller Aftershock, and Sean Hyman, global currency
analyst and advisor, believe it has already started. Rickards calls
it the “third global-currency war in history.”
The
first currency war was with the Weimar Republic following WWI and led
to hyperinflation. The second was in 1965 when France and Spain converted
U.S. dollars into gold, which collapsed the London Gold Pool, thereby
destabilizing the global financial system. This caused President Nixon
to take the U.S. off the gold standard. Says Rickards: “It started
a chain reaction of skyrocketing unemployment, an oil crisis, a crashing
stock market, and runaway inflation that lasted through Carter's presidency
and into Reagan's.”
The
second currency war didn’t quite get to hyperinflation, but anyone
who lived through it has vivid memories of long gas lines and dizzying
inflation. What happened was enough to cause Rickards
to warn that in the Third Currency War, “the devastation could
be almost immeasurable. The outcome of conventional currency wars always
results in stagnation, inflation, austerity, and financial panic…
[Innocent civilians] will be the ones to get hurt by dangerous inflation,
unstable and volatile investment markets, and the complete loss of financial
security.” It’s already underway.
Rickards,
Steve Forbes, Bob Wiedemer, and Sean Hyman, have produced an online
video called “Currency
Wars” state: “Right now we are locked in a conventional
Currency War with China, Europe, and most of the world.” These
proven experts blame the Third Currency War on the Afghanistan and Iraq
wars, the reckless spending of Bush and especially Obama and the U.S.’s
rapidly worsening trade imbalance ($500-700 billion/year) with the rest
of the world.
In
summation Rickards warns: “To put it plainly, this intentional
currency debasement will destroy the dollar and your wealth. And that's
in the best-case scenario. In a worst-case scenario you've got a global
Great Depression, as well as international turmoil that could escalate
to military conflicts.”
This
is all happening when the world is on a spending binge. The U.S. and
E.U. are not the only ones creating the equivalent of Quantitative Easing
(QE). While it took QE1 and 2 over three years for the U.S. to create
$4 trillion out of thin air, the rest of the world printed $4
trillion out of thin air in one year! China’s money
supply has grown about 19 percent a year over the last decade and, as
stated earlier, is buying gold and gold mines to attempt to make the
yuan the world’s reserve currency.
It’s
happening fast. Between the years 2005 and 2012, the American dollar
lost 40 percent of its strength compared to the Chinese yuan. Ironically,
the U.S. is devaluing the dollar deliberately, according
to Steve Forbes. Says 
Forbes,
Forbes,
“cheapening the dollar is a form of currency manipulation.”
Yet Obama blames the Chinese for being currency manipulators? While
the Fed is dueling with China, the American people are having their
wealth stripped from them without them knowing it. Forbes calls Ben
Bernanke, the Fed Chairman, “the worst central banker, just about
in American History… That’s why we have chaos in the world.”
While
inflation will be discussed in detail in Part III of the Financial Death
Spiral series, the Third Currency War has already increased
food prices by 148 percent since 2001 and energy prices by 468 percent.
(See graph previous page) This while our government insists the inflation
rate is only 2.5 percent.
Demise
of the U.S. Dollar as Reserve Currency
The
only thing that is saving us now is that the U.S. dollar is the world’s
reserve currency. The dollar forms the basis of the world's financial
system. It is what banks around the world hold in reserve against their
loans. That means every nation must use the dollar to conduct trade
on goods and services with other nations. As long as that is true we
can continue to print more money out of thin air because the rest of
the world must use those dollars to trade. The
Federal Reserve reports 70 percent of all U.S. currency is outside
the country, compared to just 50 percent 20 years ago.
China
is not so secretly attempting to destroy the U.S. by replacing the U.S.
dollar with the yuan (renminbi) as the world’s reserve currency.
China and Russia are buying tremendous
amounts of gold and other strategic commodities and assets all around
the world. They're using their dollars as fast as they can to reduce
their enormous exposure to the U.S. dollar.
China
is the second largest world economy; soon to be the first. China is
making deals all over the globe to assure its position as the holder
of THE reserve currency. These are just some of the countries that have
made currency deals with China: Germany, Russia, Brazil, Australia,
Japan, Chile, the United Arab Emirates, India and South Africa.
As
explained in Part I of the Financial Death Spiral series, these
new trade agreements area direct attack on the U.S. dollar and the dollar
may cease being the world’s reserve currency in the near future.
When we wrote on this same subject in 2011, this was only being discussed
as a possibility. It is now happening – in a big way! The federal
government, the Fed, and the blood-sucking opportunists do not want
you to know that. Sadly, most Americans don't even know what a "reserve
currency" is or that the U.S. dollar is under
attack.
China
is leading the global effort to create these international agreements
to conduct an increasing amount of trade in currencies other than the
U.S. dollar. If successful it will have catastrophic effects
on the U.S. dollar and economy. It’s a real threat. As Alan Wheatley
global economics correspondent for Reuters warns:
“the
truth is that the United States is not the only superpower in the world
anymore. The Chinese economy is actually projected to become larger
than the U.S. economy by 2016, and by some measurements the Chinese
economy is already larger. So Chinese leaders have been very
open about the fact that they believe that it just doesn't make sense
that the vast majority of all global trade should continue to be conducted
in U.S. dollars, especially considering the reckless money printing
that the Federal Reserve has been doing. At a time when the status of
the U.S. dollar is already slipping, QE3 is deeply
undermining confidence in U.S. currency. And when the U.S. dollar does
lose reserve currency status, the consequences for the United
States are going to be absolutely catastrophic.”
It
is extremely important to realize that multiple dozens of well-known
and respected economists are warning the Fed is laying the foundation
for the catastrophic economic destruction of the U.S. via its Quantitative
Easing program, primarily through the loss of the dollar’s reserve
currency status. The true threat of QE3 will be discussed in Part III
of the Financial Death Spiral series. The average American doesn’t
have a clue.
As
investment banker and best-selling author James
Rickards writes in his new book Currency Wars: "If
the currency collapses, everything else goes with it... stocks, bonds,
commodities, derivatives and other investments are all priced in a nation's
currency. If you destroy the currency, you destroy all markets and the
nation." In testimony before the U.S. Senate Rickards warned:
“Right
now we are locked in a conventional Currency War with China, Europe,
and most of the world. I believe the U.S. government is also actively
at war with our dollar and, as a dangerous consequence, the wealth of
its citizens. Because when you simultaneously make the dollar weaker,
lower interest rates, and unsustainably grow the Federal debt, you are
robbing Americans of their financial security.”
“This
is not something that may happen. From all evidence it IS happening!
”Stansberry
warns: “As [the dollar] continues to lose its position as
the world's reserve currency, it will cause a brutal downturn in our
economy, which will be about 10-times worse than the mortgage crisis
of 2008.”
Are
We at War?
As
already noted, China has launched
an all-out attack on the U.S. dollar. It wants to replace the dollar
with the Chinese yuan. China secretly bought one thousand metric
tons of gold without anyone or any intelligence agency knowing it was
happening. They did this in part by buying gold mines and becoming the
biggest gold produce in the world. The rest was purchased covertly from
dealers around the world and off the books from the central bank.
Part
of that production is secretly shipped directly to Chinese vaults, under
strict military control. To China,it is a military maneuver to potentially
wage asymmetrical economic warfare against the U.S. China’s obvious
goal is to use the gold as a hard asset to back up the yuan as the world’s
reserve currency.
But
there may be another, even more troubling reason. In preparing War Game
scenarios for the Department of Defense and CIA, James Rickards
said that if it was suddenly revealed that China had four thousand metric
tons of gold, “then you have a nuclear strike to the American
dollar. World confidence in it would be decimated. Gold, almost instantly,
would surge to a bare minimum of $3,000 an ounce and, as a side effect,
oil could become unaffordable… Oil, in an extreme case, would
be about $450 a barrel, and, on average, about $190. I think you can
imagine the devastation that would do to the savings and financial security
of average Americans.” The U.S. is, in fact, in a financial
war with China, which, if we lose, will be more devastating than
a military war.
Sovereign
Growth Funds
Then
there are Sovereign Growth Funds. Sovereign Growth Funds are an investment
fund that's controlled by a government, or central bank. Today there
are about $5 trillion worth in the world. Asia has 40 percent of them,
while the Mideast has 35 percent. Europe has 17 percent (although the
European troubles are threatening them) and North America has a mere
3 percent. To this mix, in 2012 China
and Russia decided to create a joint Sovereign Wealth Fund so they
could share intelligence with one another. And this occurred while one
of Russia's Sovereign Wealth Fund was buying up U.S. technology companies,
including one that focuses on bandwidth-intensive, high-speed communications
networks.
Without
even putting up a fight in2012, Washington, D.C. gave China access to
some of the most sensitive financial intelligence our country possesses.
The White House and Congress also didn't raise a finger in protest when
the Fed permitted three of China's largest banks to open branches in
the U.S. Warns Rickards:
“That gives them access to the Federal Reserve's money transfer
system — Fed Wire. It's critical to running America's finances.
China is in our network, in the plumbing. And it's much easier to attack
an adversary from the inside than the outside. Especially, when your
Russian ally is buying up U.S. tech companies with their Sovereign Wealth
Fund. Remember, China is already suspected of attacking our financial
infrastructure earlier this year."
Will
China use its gold and ability to tap into our financial network to
attack the U.S.?
Rickards
explains a series of War Games actually run by the Pentagon and CIA;
from Israel attacking Iran to China just attacking the U.S. financial
system directly. None end well. Most result in a complete meltdown of
the entire global financial system. And the Obama administration allowed
the U.S. and the world to be put into this situation. Pray it doesn’t
happen.
The
game President Obama and the Fed are secretly playing with the people’s
money and future stretches incredulity to the breaking point. It can
only be described as evil beyond the pale. Whether it is because of
ideological blindness or deliberate actions to destroy the U.S. becomes
meaningless. The result is the same. The potential horror that faces
the United States is incalculable and is discussed in Part III and IV
of the Financial Death Spiral series.
Part
I—The Disintegration of the Global Financial Architecture
Part II—China, Currency Wars and the U.S. Dollar
Part III—Inflation or Hyperinflation?
Part IV—The Bond Market Crash
Part V—The Failure of Keynesian Economics
Part VI—The Success of Austrian Economics Part VII—The Root of What’s Wrong – Progressivism
Part II—China, Currency Wars and the U.S. Dollar
Part III—Inflation or Hyperinflation?
Part IV—The Bond Market Crash
Part V—The Failure of Keynesian Economics
Part VI—The Success of Austrian Economics Part VII—The Root of What’s Wrong – Progressivism
©
2013 Michael Coffman - All Rights Reserved
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This Article
Kristie
Pelletierhas a psychology degree and is a freelance writer and researcher.
She has done research and writing with Dr. Coffman on national and geopolitical
issues for nearly 20 years.
Dr.
Coffman is President of Environmental Perspectives Incorporated (epi-us.com)
and CEO of Sovereignty International (sovereignty.net) in Bangor Maine.
He has had over 40 years of university teaching, research and consulting
experience in forestry and environmental sciences and now geopolitics.
He was one of four who stopped the ratification of the Convention on Biological
Diversity one hour before the Senate cloture vote. The Biodiversity Treaty
is one of the major treaties promoted by Agenda 21. He produced the acclaimed
DVD Global Warming or Global Governance (warmingdvd.com) disproving man-caused
global warming—another major theme of Agenda 21.
Dr.
Coffman’s book, Plundered,
How Progressive Ideology is Destroying America (AmericaPlundered.com)
details how the American people are being indoctrinated and bullied into
a very destructive belief system called progressivism in the same manner
described in this article. His and co-Author Kate Mathieson’s newest
book, Radical
Islam, The Plan to Take America for the Global Islamic State, provides
shocking evidence of how there is no such thing as a moderate Muslim,
and how by political correctness is blinding Americans to the real danger
that the Obama administration is putting the U.S. in by putting Islamists
in high administrative positions and to define U.S. policy. Equally shocking
is the comparison of the Bible and Qur’an. It’s a wake-up
call to America. He can be reached at 207-945-9878.
E-Mail: mcoffman@epi-us.com
Website: DiscerningToday.org
information from this investigation has already been shared with the Pentagon, CIA, Congress, and the Treasury . . .
The findings from what you're about to view
suggest that our government, our economy, and your wealth may soon fall
victim to a devastating and incomprehensible assault from the rise of . .
.
Currency Wars
Appearing in this video investigation are top minds in
economics, politics, and national security . . .
http://w3.newsmax.com/newsletters/fbta/video.cfm
Below is the official transcript of the investigation
John Burke:
Someday, in
the not-too-distant future, you may wake up, turn on your TV, and,
regardless of the channel, all you'll see are breaking news reports.
The unthinkable has happened.
Our great nation has been attacked by a coordinated, multi-lateral strike.
The aggressors could be China, Russia, or even Iran.
Maybe even a rogue outfit operating out of Dubai.
We most likely won't know until it's too late.
And that's because, unlike traditional wars, our enemies didn't target a city inside our borders, or a military base abroad.
This time, they set their crosshairs on you,
your bank
account, your life savings, and our national currency.
account, your life savings, and our national currency.
The dollar has come under fire.
And our enemies' weapons of choice will not be soldiers, tanks, or missiles.
Instead, they will covertly attack us using an arsenal of economic weapons of mass destruction.
This may
surprise you, but our military and national intelligence community have
already been secretly preparing for this scenario.
Much of what
you are about to witness in today's investigation has been played out in
war games held by the Pentagon, at classified facilities.
In fact, you are about to meet the key architect behind those military planning sessions — James Rickards.
And you will
soon become privy to information he delivered during separate
testimonies to the Senate and House of Representatives, as well as
meetings with the Treasury, the World Bank, and the highest levels of
our intelligence community.
James Rickards warns that as the economic crisis in the United States, Europe and other nations gets more desperate . . .
And as the governments of the world struggle to deal with tens, even hundreds of trillions of dollars of unpayable debt . . .
Eventually, aggressive currency devaluations from all corners of the globe will break out.
And a catastrophic currency war will erupt.
One that could leave the U.S. dollar vulnerable, and its status as the world's reserve currency in jeopardy.
Right as an economic assault on the financial security of all Americans, ravages our country.
It's a frightening scenario.
Which is why you need the real story.
And that's why also joining us, on this broadcast, is one of the country's most respected financial voices, Steve Forbes.
Steve will be sharing with you his insights on the problems we face, and what you can do to deal with these looming threats.
Now before we begin, I want to make this very clear, our investigation today will cover some controversial subject matter.
But regardless
of how dark the predictions and analysis you are about to witness are,
the true purpose of this broadcast is to show you a clear path forward.
So you can
avoid falling victim to one of history's most devastating assaults on
the wealth and safety of millions of innocent Americans.
Today, I'm inviting you to join me as we investigate the rise of global Currency Wars.
Hello, my name is John Burke, and I want to thank you for joining me today.
The 21st century has been marked by 9/11, American conflicts in Iraq and Afghanistan, and uprisings around the world.
But the next international threat may be an attack on our financial markets.
On this
groundbreaking broadcast we are going to discuss the causes,
consequences, and dangers of the United States falling into a
full-fledged currency war.
Our
investigation will lead us from a top-secret military location in
Maryland, to the Treasury, all the way to the Chinese Embassy.
Today, you'll discover the reasons why the United States may be one of the aggressors in this global conflict.
You'll be
alerted to how China may be using their military to secretly stockpile
gold, while covertly infiltrating the American banking system.
In fact, they
may have already gained access to some of the most sensitive financial
intelligence at the Federal Reserve and Treasury.
You'll
be shown how our enemies could use undetectable backchannels and a web
of hedge funds to single-handedly topple Wall Street in a day.
And you'll be briefed on why this currency war may lead to crippling inflation and the destruction of the dollar.
Millions upon
millions of Americans could be robbed of their life savings and net
worth, as they suffer an attack an adviser to the Director of National
Intelligence has called, "a financial Pearl Harbor."
In
addition to former presidential candidate — Steve Forbes, and James
Rickards, throughout this broadcast, we will also be joined by the NY
Times best-selling author of Aftershock — Bob Wiedemer, and esteemed
global-currency specialist — Sean Hyman.
And along the
way you'll discover how to protect you and your family's wealth,
investments, and way of life from this looming, international threat.
It's critical you take what you are about to see very seriously.
Because our military and national intelligence community certainly are.
Now, let's meet the team behind this investigation.
James
Rickards is a senior managing director at Omnis Incorporated, a market
intelligence and threat finance firm founded by former CIA and National
Intelligence community members.
Over the last
35 years, he has been involved in some of our nation's most important
events, including helping end the Iran hostage crisis, investigating
financial terrorism after 9-11, and advising the Pentagon regarding
economic threats that America may face in the coming years.
James
Rickards has testified before the House of Representatives and the
Senate, and regularly meets with the Treasury and members of Congress.
He is also a
NY Times best-selling author and has been featured in the Wall Street
Journal, Fox, CNN, the New York Times, and the Washington Post.
Steve Forbes is the chairman and editor-in-chief of Forbes Media.
A
former presidential candidate, Steve Forbes has become a national
advocate for fiscal responsibility, fair taxation, and America's return
to economic dominance.
Bob Wiedemer
is the NY-Times best-selling author and acclaimed economist who went
against the mainstream media to predict the four-bubble crash in our
real estate, stock, credit, and private-debt markets that caused the
recession.
Sean Hyman is
a 20-year Wall Street veteran and renowned global currency market
specialist who has lent his expertise to CNBC and other popular
financial programs.
In a few minutes, we'll be joined by Steve Forbes.
But now, let's begin our investigation with James Rickards at the Applied Physics Lab.
Part 1: The Currency War Is Exposed
Location: Applied Physics Lab, Laurel, MD., and other D.C. Areas.
Present at Location:
James Rickards: Adviser to CIA, Pentagon, and Director of National Intelligence
Ted Goldenberg: Newsmax Investigative Reporter
Present at Location:
James Rickards: Adviser to CIA, Pentagon, and Director of National Intelligence
Ted Goldenberg: Newsmax Investigative Reporter
James Rickards:
The Applied Physics Lab is known for weapons and spacecraft research.
But what
takes place at their Warfare Analysis Laboratory are virtual war games
involving the highest ranks of the Pentagon, military, and national
intelligence community.
It was there in 2009 that the Pentagon recruited me to create the first currency war simulation ever held.
Ted Goldenberg, Investigative Journalist:
Why is a Currency War now on the Pentagon's radar?
James Rickards:
Simply put, America has become virtually undefeatable in direct military conflicts.
Especially in what the military calls 4-C-I. That stands for Command, Control, Communications, Computers, and Intelligence.
That's because we spend $711 billion a year on our military budget.
41% of what the entire world allocates to their armed forces.
Frankly, there's not an aircraft carrier we can't sink, or an army we can't defeat.
And conventional terrorism, while absolutely dangerous, is not on the same scale as a large nation's army.
So what's happening is that rival nations and terrorist organizations are developing capabilities in unconventional warfare.
Things like cyber warfare, biological or chemical warfare, and now, financial weapons of mass destruction.
Like currencies, stocks, derivatives, sovereign wealth funds, energy, even gold.
This is my specific area of expertise.
And the
United States' military has come to the conclusion that our nation is
completely unprepared for a full-blown assault on our economy.
Ted Goldenberg:
Now, how did the Pentagon come around to identifying you as the person to create this currency war scenario?
James Rickards:
It wasn't an overnight decision.
I began my
career in the international division of Citibank, which stationed me in
some dangerous places like Lagos, Nigeria, Liberia, Zimbabwe, Pakistan,
and all over the Middle East.
My experience with Middle Eastern financing in particular is what caught the attention of the national intelligence community.
So, after
9/11 struck, I was asked by high-ranking CIA members to look into
suspicious insider-trading activity that took place prior to the attack.
That was my first assignment with the National Intelligence Community.
And over the
years, I have worked with the Pentagon and Defense Department to develop
measures for using the capital markets to predict potential terrorist
threats.
The recession was a wake-up call to the U.S. military, and our intelligence community.
They saw, with complete clarity, that we had a very easy-to-exploit weakness in our financial markets.
One that is just as dangerous as a conventional attack from an enemy.
In a sense,
an enemy aggressor could launch a financial Pearl Harbor on us, which
the United States would be totally unprepared for, and would have very
little defense against.
And the ripple effect from that could wreak havoc throughout our society as trillions in wealth is lost.
And the dollar is decimated.
Ted Goldenberg:
What is a Currency War?
James Rickards:
Great question.
I built the Currency War simulation around an unconventional attack.
This way the Pentagon could prepare for the extreme scenario.
But in its
most basic form — the one that is historically the most common — a
currency war breaks out when nations begin to intentionally devalue
their currency against each other to help boost their economies.
The flawed logic goes like this, if you make your currency cheaper, that makes your exports cheaper.
It also
theoretically makes your country more appealing to foreign investments,
since foreign currencies now buy more inside your borders.
And the powers-that-be figure that'll solve a floundering economy.
History has shown this not to be the case time and time again.
What devaluing your currency also does is make the debt you repay to other countries cheaper.
This angers the people you owe money to.
Ted Goldenberg:
With America $16 trillion in the hole, it's easy to see why that would be an attractive option to some folks in Washington.
James Rickards:
Exactly.
It's become apparent Washington's plan is to intentionally weaken the dollar.
The problem is, once one country devalues their currency, soon after, other countries do it in retaliation
Ted Goldenberg:
So am I correct in assuming that you believe America is on the brink of a full-scale currency war?
James Rickards:
I think it's already begun.
It's the third global-currency war in history.
And the devastation could be almost immeasurable.
The outcome of conventional Currency Wars always result in stagnation, inflation, austerity, and financial panic.
Now, when you
are dealing with Currency Wars, the only good guys are the innocent
civilians in America, and the other countries whose governments are
waging this war.
Because they
will be the ones to get hurt by dangerous inflation, unstable and
volatile investment markets, and the complete loss of financial
security.
To put it plainly, this intentional currency debasement will destroy the dollar and your wealth.
And that's in the best-case scenario.
In a
worst-case scenario you've got a global Great Depression, as well as
international turmoil that could escalate to military conflicts.
Or, you could
have chaos erupt if a terrorist organization, or some unstable dictator
decides today is the day to bring down the financial markets.
The outcome of conventional Currency Wars always result in stagnation, inflation, austerity, and financial panic.
But Currency Wars can also lead to actual war.
World Wars.
Follow Up Interview With James Rickards:
Currency Wars and World Wars
Currency Wars and World Wars
Location: Applied Physics Lab, Laurel, MD., and other D.C. Areas.
Present at Location:
James Rickards — Adviser to CIA, Pentagon and Director of National Intelligence
James Rickards:
There were two currency wars that took place in the 20th century.
The first one occurred from 1921 to 1936, between World War I and World War II.
After World War I had ended, Germany owed $33 billion in reparations.
That's roughly $400 billion today.
Well, to help pay off that figure, they started printing obscene amounts of money.
This caused the Weimar hyperinflation epidemic, where a wheelbarrow full of printed money got you a loaf of bread.
In retaliation, France and the United States began intentionally devaluing their currencies during this period.
This led to the French franc collapsing.
But three outcomes stand out from this Currency War.
One, Germany's hyperinflation helped fuel Hitler's rise, which directly led to World War II.
Because economic chaos leads to extreme movements in a society.
Two, the
United States' role in this currency war became a large catalyst for the
Great Depression, and FDR's brazen gold confiscation from American
citizens.
And three, in Japan, a dangerous military faction took control of the government.
Like in Germany, an extreme movement took over.
And, while it's not a straight line, this indirectly led to the attack on Pearl Harbor.
The second
currency war began in 1965 when France's President, Charles de Gaulle,
converted $150 million in his country's reserves into gold.
The equivalent of over $1 billion today.
And he threatened to convert another $150 million shortly after.
Spain decided to follow on France's heels and converted $60 million into gold.
This helped cause the collapse of the London Gold Pool, which put the stability of the global financial system into jeopardy.
And that allowed the IMF to create a new form of international currency called a Special Drawing Right.
You may be
hearing a lot about this in the near future, as nations continue to
demand a replacement for the U.S. dollar as the world's reserve
currency.
Now, a few
years later, as the competitive devaluations kept going back and forth,
President Nixon, on a Sunday evening in 1971, stated . . .
"I am determined that the American dollar must never again be a hostage in the hands of international speculators."
And on that day the gold standard died.
But on that broadcast ,Nixon also announced that he was levying an instant 10% tax on imports.
The fallout from this speech would become known as the Nixon Shock.
And it
started a chain reaction of skyrocketing unemployment, an oil crisis, a
crashing stock market, and runaway inflation that lasted through
Carter's presidency and into Reagan's.
The United States suffered through three recessions from 1973 to 1981.
To end this second currency war, President Reagan and Paul Volker had to institute some very difficult interest rate hikes.
But the damage was done.
"We're Locked in a Currency War
With China, Europe, and Most of the World"
With China, Europe, and Most of the World"
Location: Applied Physics Lab, Laurel, MD., and other D.C. Areas.
Present at Location:
James Rickards — Adviser to CIA, Pentagon, and Director of National Intelligence
Ted Goldenberg — Newsmax Investigative Reporter
Present at Location:
James Rickards — Adviser to CIA, Pentagon, and Director of National Intelligence
Ted Goldenberg — Newsmax Investigative Reporter
James Rickards:
Right now we are locked in a conventional Currency War with China, Europe, and most of the world.
I believe the
U.S. government is also actively at war with our dollar and, as a
dangerous consequence, the wealth of its citizens.
Because when
you simultaneously make the dollar weaker, lower interest rates, and
unsustainably grow the Federal debt, you are robbing Americans of their
financial security.
This is what I testified before the Senate about.
Ted Goldenberg:
Can you walk me through how this third Currency War began?
James Rickards:
It took a perfect storm really.
We've been aggressively acquiring more and more debt for decades now.
But since 9-11, it's really sped up.
The Wars in Iraq and Afghanistan alone cost about $4 trillion.
And Presidents Bush and Obama's loose spending policies have done us no favors.
Plus, the United States' trade imbalance with the rest of the world has been getting worse and worse.
This bottomed
out in 2008 right as our dollar was surging, while we were in the midst
of the most dangerous economic downturn since the Great Depression.
The perfect storm had arrived.
And that's when Washington foolishly decided that a Currency War was the best cure for the recession.
They obviously didn't learn from Germany during Currency War I.
So to stop
the dollar in its tracks, the Federal Reserve began this war when they
printed trillions of dollars, while enacting their multiple,
quantitative-easing gambles.
Ted Goldenberg:
There's been a lot of talk about China attacking our economy over the years, but are you saying we fired the first shots?
James Rickards:
Absolutely.
The evidence is in the numbers.
In 1997 the U.S. trade deficit with China was less than $50 billion.
It's closing in on $300 billion a year now.
Now you've got China with all these extra dollars they've collected from us, so what did they do with it?
They bought a great deal of Treasuries.
So faced with
an insurmountable disadvantage in trade, and a growing Super Power that
has stockpiled our debt, what does the United States do?
Print a lot of money and push out the quantitative easing programs.
The purpose of these maneuvers wasn't just to jumpstart the American economy.
That's just the cover story.
QE 1 ran from late November 2008, all the way up through the end of March 2010.
The Fed created about $1.3 trillion out of thin air with that move, and the dollar was weakened by as much as 21%.
But this wasn't good enough.
So, in
November 2010, they rolled out QE2, which ran all the way up through the
end of June 2011, flushing another $600 billion through the system.
The dollar bottomed out 10% lower during this run.
Then came the $400 billion Operation Twist in October 2011, which carried well into 2012.
Now, during
this stage of the Currency War, the Fed has also printed an additional
$1.9 trillion, a 24% increase to our money supply.
So that's about $4 trillion of our funny money that's flooded the global markets and weakened our dollar by as much as 27%.
That means
round one of this currency war caused average Americans to become
victims from the Fed covertly eradicating over a quarter of the value of
their life savings and investments.
At one of my
Treasury meetings, I even warned that Ben Bernanke's dollar weakening
policies could be more dangerous to our economy and the National
Security of the United States, than Al Qaeda.
Ted Goldenberg:
OK, you've established that we're the aggressors in this currency war.
So how are our, for lack of a better word, our enemies . . . how are they retaliating?
James Rickards:
Since we
opened up that QE can of worms, countless other nations have retaliated
by unleashing their own quantitative easing measures on us.
Not including the U.S., $4 trillion was printed by world governments last year from global quantitative easing.
And what's broken out is inflation all across the international community.
We specifically exported a massive amount of it to China on our own.
Their money supply has grown about 19% a year over the last decade.
Not exactly a model for stable China-United States relations.
Quantitative easing delivered calculated strikes to the financial security of many nations and their citizens.
And I don't think the Fed is done making these unwelcomed attacks on foreign economies.
This currency war has played a big part in food prices rising about 148% and energy prices 468% over the last decade.
This is happening around the world, not just here.
Ted Goldenberg:
You mentioned the U.S .exporting inflation to China, what is China doing to defend itself during this Currency War?
James Rickards:
I think they're playing the long game.
They absolutely want to bring down the dollar and replace it with the yuan in the global economy.
They've said this publicly.
And I believe, as do many in the intelligence community, that China is secretly stockpiling gold.
But frankly, that's not the only weapon they could use.
In 2012,
without even putting up a fight, Washington, D.C. gave China access to
some of the most sensitive financial intelligence our country possesses.
Part 2: Steve Forbes on the "Disruptive"
Consequences of Currency Wars and Ben Bernanke's
Role as the Worst Banker in U.S. History
Consequences of Currency Wars and Ben Bernanke's
Role as the Worst Banker in U.S. History
Location: Newsmax Studio, NY.
Present at Location:
Steve Forbes — Chairman, Forbes Media
John Burke — Host
Present at Location:
Steve Forbes — Chairman, Forbes Media
John Burke — Host
John Burke:
In a few moments, we'll rejoin James Rickards as he continues his investigation into this dangerous Currency War.
And
throughout this broadcast, we'll be joined by NY Times best-selling
author Bob Wiedemer, global currency specialist Sean Hyman, and the man
seated to my right, Steve Forbes.
Now,
to make sure you have everything you need to prepare for the future, at
this investigation's conclusion, you can receive a package that
contains a controversial book Congress and the national intelligence
community are all reviewing, including an unpublished chapter that was
never released.
Plus, a collection of investment reports that disclose secrets for safeguarding your wealth during this currency war. OK, now I'd like to welcome former presidential nominee, and current chairman of Forbes Media, Steve Forbes. Steve, our broadcast today centers around James Rickards' investigation into a topic your publication has covered extensively, Currency Wars. Forbes Magazine has stated that the Currency Wars are heating up and that this is making a path out of this recession unclear.In another article, your publication predicted that Currency Wars would eventually destroy the dollar and that the quantitative easing measures and other Fed gambles were causing a rift between America and China that could spell doom for both countries. And just recently, Forbes Magazine wrote that James Rickards' work exposing these Currency Wars may be as important as Paul Revere's Midnight Ride for American Independence. Since this is a new idea to many folks on Main Street, why do they need to be concerned with the threat of Currency Wars?
Plus, a collection of investment reports that disclose secrets for safeguarding your wealth during this currency war. OK, now I'd like to welcome former presidential nominee, and current chairman of Forbes Media, Steve Forbes. Steve, our broadcast today centers around James Rickards' investigation into a topic your publication has covered extensively, Currency Wars. Forbes Magazine has stated that the Currency Wars are heating up and that this is making a path out of this recession unclear.In another article, your publication predicted that Currency Wars would eventually destroy the dollar and that the quantitative easing measures and other Fed gambles were causing a rift between America and China that could spell doom for both countries. And just recently, Forbes Magazine wrote that James Rickards' work exposing these Currency Wars may be as important as Paul Revere's Midnight Ride for American Independence. Since this is a new idea to many folks on Main Street, why do they need to be concerned with the threat of Currency Wars?
Steve Forbes:
Well, the fact of the matter is that without a sound currency, you don't get to stable economic growth.
And we should have learned that, the last round was in the 1970s.
So money is a way of conveying information and money facilitates transactions.
When central banks go on these benders, what it does is like a virus in your computer, it corrupts the information.
It makes it
very difficult to have investments for the future, you're just trying to
cover what you have now, it creates uncertainty.
It's like minutes in an hour.
Imagine what your day would be like if the number of minutes in an hour changed each day.
You'd soon have to have hedges and derivatives to figure out how many hours you're working. So it's very disruptive.
John Burke:
You know,
between the years of 2005 and 2012, the American dollar lost 40 percent
of its strength compared to the Chinese currency.
So a cheaper dollar should mean cheaper exports to China. Is this good for our economy and Americans?
Steve Forbes:
Well, that's
one of the great fallacies of modern economics is that if you cheat on
your currency, in effect raise taxes on imports, you somehow strengthen
the nation.
If cheapening your money was the way to wealth, Zimbabwe and Argentina would own the world today.
You have to
earn your keep in this world the honest way: being productive, putting
out products and services that people want, meeting the needs and wants
of others, not trying to manipulate prices.
It would be
similar to a working person saying, 'Let's increase productivity not by
better machinery, better work methods, and the like, but let's increase
the number of minutes in an hour from 60 to 70.
And that way you get more work out of a worker with the same pay.
Boy, wouldn't that be a stimulus to the economy.
No, ultimately, it would not.
John Burke:
Many in
Congress have called for the White House to label China a currency
manipulator. But CNN has suggested that we should take a look in the
mirror about this issue as well. What are your thoughts?
Steve Forbes:
Well, CNN,
for once, got that one right, and the biggest manipulator in the world,
an inept manipulator, one that is very destructive is our Federal
Reserve.
Their
efforts, and they've been doing it since the last part of the last
decade, of cheapening the dollar is a form of currency manipulation.
So, let's not blame the Chinese.
Let's blame
where the blame goes, or should go, and that is, if we had a stable
dollar and removed the barriers to commerce in this country, you'd see
America boom and you'd see people wanting to own the dollar because they
knew it would be as good as gold.
John Burke:
Are you happy with the job that Ben Bernanke is doing?
Steve Forbes:
He's been the worst central banker, just about, in American history.
John Burke:
The recession seemed to hold inflation at bay for a while, but we appear to be seeing the first waves of it now.
What's your short-, your midterm- and your long-range outlook for inflation?
Steve Forbes:
We already suffered from cheapening the U.S. dollar.
We never would have had the housing bubble if we hadn't printed so much money.
The juice just wouldn't have been there for it.
So, having
blown up the economy with the housing bubble, we've already had the
effects of a cheap dollar, trashing your own money.
Inflation, when you cheapen your currency, doesn't always follow the same course in the destructive course it takes.
Floods don't always go in the same direction.
You would not have had a sovereign debt crisis.
You would not have had a false commodity boom. And, again, it corrupts the information in the marketplace.
Oil prices averaged $21 a barrel between the mid-1980s and early part of last decade, and now it's $80, $100 a barrel.
How much of that is inflation?
How much of that is expectations of more Bernanke magic work?
How much of it is real demand for the product? You don't know.
We saw it in the 70s it goes from $3 to $40 a barrel.
Reagan kills
the terrible inflation with some tight money, it goes down to 10,
stabilizes at 20, 25, but you know what the real price is.
That's why we have chaos in the world."
John Burke:
"Our federal
debt is sitting at around $16 trillion and that's on the books. If you
factor in Social Security and Medicare, we're at between $100 and $200
trillion, depending on who you ask.
How bad is it really and how can America ever get out from beneath this epidemic?"
Steve Forbes:
Well, the danger of asking a question like that is the answer is, "Well we must sacrifice more and put on more taxes."
No, the way
to do it is to follow the spirit of what Reagan did in the early 80s,
that is you create an environment for the economy to grow again and
that's how we've dug ourselves out.
A stable
dollar helps dig ourselves out. One good thing if you simplify the tax
code, the dollar is good as gold. One good thing is not only would you
get more economic growth, but also asset values go up. Why? Because
people see a future again. You know markets try to anticipate the
future. You look at the 80s. Even though government debt went up in the
80s, the assets of the nation went up 10 times faster. So that's how you
dig out.
John Burke:
Steve, I want to continue this conversation in just a bit so stick around please.
Steve Forbes:
My pleasure.
John Burke:
Now, let's
rejoin James Rickards at the Treasury as he discusses dangerous and
unconventional Currency War threats we face from China, Iran, and
Russia.
And then
later, from outside the Chinese Embassy, James will play out a Currency
War scenario, just like he did for top Pentagon officials and the
national intelligence community.
Plus,
throughout this broadcast, James, Steve Forbes, Bob Wiedemer, and Sean
Hyman will give you specific investment and personal finance tips on
gold, the stock market, and a whole range of other wealth preservation
opportunities.
Part 3: Financial Weapons of Mass Destruction
Can China, Russia, and/or Iran
Destroy the American Economy?
Can China, Russia, and/or Iran
Destroy the American Economy?
Location: The Treasury Building, Washington, D.C.
Present at Location:
James Rickards — Adviser to CIA, Pentagon, and Director of National Intelligence
Ted Goldenberg — Newsmax Investigative Reporter
Present at Location:
James Rickards — Adviser to CIA, Pentagon, and Director of National Intelligence
Ted Goldenberg — Newsmax Investigative Reporter
Ted Goldenberg:
So, let me see if I'm following you.
This Currency War has two levels.
The first
concerns the conventional threats, where you have aggressors, like the
Federal Reserve behind us, waging a war on other countries and average
Americans by devaluing the dollar, printing money, and enacting
quantitative easing.
And then in retaliation, those countries devalue their currency against us.
They push out their own quantitative easing maneuvers, print their own money, and attack the wealth of their own citizens.
And this back
and forth eventually can lead to dangerous inflation, decimated
currencies, and the loss of trillions of dollars of wealth for folks all
across the country and the world for that matter.
That's what we covered at the Applied Physics Lab.
But the second level of this currency war concerns the unconventional threats, the financial weapons of mass destruction, right?
James Rickards:
That's correct.
I realize this is a very complex subject, so let met me put it this way.
We've all seen the movie Casablanca.
It centered around Rick's Café.
A place where
intelligence could be traded, deals were struck, enemies gathered
together, and all kinds of treachery could take place behind the scenes.
Look at the global financial markets as one big Rick's Café.
Everyday
Iranian provocateurs, oil sheiks, Russian hit men, Saudi arms dealers,
and average American investors do business with each other without even
knowing it.
What this has
created is an environment where the United States, I'm talking about
our government, as well as folks on Main Street . . .
Everyone is now vulnerable to unconventional currency war attacks from many of our enemies.
Ted Goldenberg:
Let's start with Iran.
It seems to
me that they may have a score to settle with the U.S. due to our
relationship with Israel, and the sanctions and oil embargo we hit them
with.
James Rickards:
I'd say that's a fact.
America rightfully punished Iran for their nuclear program and this dramatically hurt their economy.
In one year's time, Iranians saw the prices of basic food commodities like milk shoot up 42%, meat 48%, vegetables 92%.
Iran's
currency, the rial, lost 55% of its worth against the dollar on the
black market, which is the only place you can get dollars over there.
Ted Goldenberg:
So what kind of unconventional weapons does Iran have in this Currency War?
James Rickards:
All of our large enemies have two primary financial weapons.
The first is commodities like oil.
If
Ahmadinejad decides to make his play and close the Strait of Hormuz,
we'll immediately see an oil price shock across the globe.
This is a direct and calculated, unconventional currency war maneuver, because oil prices hit our economy.
Follow-Up Interview With James Rickards:
Why Should the Strait of Hormuz Matter to You?
Why Should the Strait of Hormuz Matter to You?
Location: The White House, Washington, D.C.
Present at Location:
James Rickards — Adviser to CIA, Pentagon, and Director of National Intelligence
James Rickards:
The Strait of
Hormuz is strategically the most important oil route on the planet —
35% of all oil that is carried across the sea and more than 31,000 ships
travel through here each year.
Caption: 35% of all oil that is carried across the sea travels through Strait of Hormuz.
Many of them are the warships and submarines of the U.S. Navy and Iranian Revolutionary Guard Corps.
Now, just
imagine if Iran shuts off the Strait of Hormuz and blocks over a third
of the oil on the ocean from reaching its destination.
Think about what that would do to oil prices, and as a side effect, gold and food prices.
It's a powerful, and politically sensitive card the Iranians can play in this currency war.
The Dangerous Link Between Iran and China
James Rickards:
Even if the Strait of Hormuz isn't closed off, we need to worry about the bond Iran and China have formed lately.
We know China wants to replace the dollar as the world's reserve currency.
And since
international oil transactions are settled in dollars, what better way
to rebel against this and make a strong statement, than to buy your
Iranian oil with yuan.
But China brought Russia into the fold too by moving the yuan they use to buy Iranian oil through Russian banks.
And it's a lot of money, about $20 to 30 billion a year.
So right there you have Iran, China, and Russia teaming up to weaken the dollar's influence.
Ted Goldenberg:
That's a dangerous trio of countries working together.
You mentioned back at the Applied Physics Lab that you believe China is secretly stockpiling gold, what makes you think that?
James Rickards:
Because they've done it before.
From 1977 through 2000, China's gold reserves sat at 395 metric tons.
Then after 9-11, their reserves spiked to about 600 tons.
Then from 2002 through 2008, they stayed at this level, or so we thought.
In 2009, without anybody having an early warning, even the intelligence community, China unveiled gold reserves of 1,054 tons.
This was right as the first waves of this Currency War began to heat up.
How can China secretly get that much gold, that quickly, into their reserves without sounding any alarms?
The answer is simple.
They are treating the acquisition of gold like it's a military mission.
China has become the number one gold producer, and they are doing this by purchasing mines all over the world.
They're expanding and conquering.
And, in many
instances, they have the pure gold ore, or what's called dore' which is
90% pure, shipped directly from the mine for refining and storing in
their vaults.
And their military monitors this entire process.
It's critical they keep this secret, because they aim to acquire this gold as cheaply as possible.
Ted Goldenberg:
So how much gold does China need to be effective in this Currency War?
James Rickards:
Look at it this way. America is to gold, what Saudi Arabia is to oil.
We've got over 8,100 metric tons at Fort Knox and West Point.
That's 26% of the world's gold reserves.
Let's compare economies.
US GDP is $15 trillion.
China is about $7 trillion.
So, to have an equivalent gold-to-GDP ratio, China needs about 4,000 metric tons.
Ted Goldenberg:
What if China
came out of the blue and revealed that they have 3,000 or 4,000 tons of
gold in their reserves that they've secretly built up?
James Rickards:
Then you have a nuclear strike to the American dollar.
World confidence in it would be decimated.
Gold, almost instantly, would surge to a bare minimum of $3,000 an ounce and, as a side effect, oil could become unaffordable.
Over the last 30 years, gold prices have averaged about a 16-to-1 ratio with oil.
But it's gotten as low as 6.6-to-1 during 2008, when the Currency Wars began.
So, in that range, you are looking at oil, in an extreme case, of about $450 a barrel, and, on average, about $190 . . .
I think you can imagine the devastation that would do to the savings and financial security of average Americans.
Ted Goldenberg:
I don't even have to imagine.
Americans have seen firsthand how tough high oil and commodity prices can be on their bank accounts.
So if commodities were used as a weapon, it would be a nightmare.
Now, what is the second unconventional threat we face in this Currency War?
James Rickards:
This one is definitely on the radar of the National Intelligence community.
I think the biggest weapon Iran, China, or Russia could put in play, would involve what are called Sovereign Wealth Funds.
That's an investment fund that's controlled by a government, or central bank.
The numbers that are in play are simply staggering.
In 2007 there was $2.5 trillion sitting in Sovereign Wealth Funds around the world.
Now it's $5 trillion.
By 2015, it could reach $12 trillion.
And a lot of that is under the control of governments who are not the friendliest to the U.S.
Only 3% of those funds are in North America.
So we're not even a blip on the radar.
$2 trillion is sitting in Asian Sovereign Wealth Funds.
$1.8 trillion is in the Middle East.
And Sovereign Wealth Funds have very little transparency.
Most have military grade security measures in place.
Armed guards, tapped phones, cell phone signal disrupters, high-tech surveillance.
Ted Goldenberg:
So you're saying it's hard to get a bead on what they're up to?
James Rickards:
I'll give you an example.
After China
revealed they had secretly added all that gold to their reserves, we
eventually found out one way they did it was with a Sovereign Wealth
Fund called the State Administration of Foreign Exchange — or SAFE for
short.
It purchased gold covertly from dealers around the world and off the books from the central bank.
Now here's something that may be worth keeping an eye on today.
In 2012,
China and Russia decided to create a joint Sovereign Wealth Fund so they
could share intelligence with one another. And this occurred while one
of Russia's Sovereign Wealth Funds was buying up U.S. technology
companies, including one that focuses on bandwidth-intensive, high-speed
communications networks.
We know China and Russia are getting pretty close, especially with that triangle deal they have with Iran regarding oil.
Now let me add another piece to the puzzle.
In 2012, the
White House and Congress, didn't raise a finger in protest when the Fed
green lighted three of China's largest banks opening up branches in the
U.S.
I do specific
work for the Director of National Intelligence on matters that involve
potential threats from foreign investments in our country.
This chain of events fits the bill.
Ted Goldenberg:
James, what is the problem with China opening up banks in the U.S.?
James Rickards:
That gives them access to the Federal Reserve's money transfer system — Fed Wire.
It's critical to running America's finances.
Plus, the
People's Bank of China's influence is now so powerful, they are the only
central bank in the world that is allowed to buy Treasurys straight
from the government.
That means they have direct access to the Treasury's electronic federal bond auction system too.
China is in our network, in the plumbing.
And it's much easier to attack an adversary from the inside than the outside.
Especially, when your Russian ally is buying up U.S. tech companies with their Sovereign Wealth Fund.
But listen, nothing has happened yet.
It may all be innocent and coincidental.
Or it may not be.
Part 4: Bob Wiedemer: Why the Fed's
Financial Magic Tricks Won't Work Much Longer
Financial Magic Tricks Won't Work Much Longer
Location: Newsmax Studio, NY.
Present at Location:
Bob Wiedemer — Economist, NY Times Best-Selling Author of Aftershock
John Burke — Host
Present at Location:
Bob Wiedemer — Economist, NY Times Best-Selling Author of Aftershock
John Burke — Host
John Burke:
You've seen some startling evidence.
At the Applied Physics lab, James Rickards disclosed the conventional Currency War that threatens your wealth.
Then, outside the Treasury, he warned you of unconventional threats from Iran, China, and Russia.
And a little
later, we'll rejoin James outside the Chinese Embassy in Washington,
D.C. where he will walk you step-by-step through a Currency War scenario
like he created for the Pentagon.
But now, I want to talk to Bob Wiedemer about today's investigation.
Bob, thank you for joining us.
Bob Wiedemer:
My pleasure John.
John Burke:
Bob, in your
NY Times best-selling book Aftershock, you predict that average
Americans could soon be hit by a 50% stock market crash, a second
housing bust, and three years of 100% inflation.
How do James' Currency War findings play into your analysis?
Bob Wiedemer:
James proved that all of this quantitative easing and money printing during this Currency War is destroying the dollar.
But what also has occurred from these Fed gambles is an artificial propping up of the stock market.
We saw about a 100% bump.
But this won't work forever.
Eventually the financial markets will stop responding to these magic tricks.
And what'll be left in the wake is dramatic inflation and a dollar with no legs to stand on.
The 2% to 3% inflation we are seeing now is the starting point.
Soon that'll
turn into 8% and 10% inflation, and then three to four years down the
road we could see an aggressive jump, and 100% annual inflation could
strike.
John Burke:
So, as a consequence, this will bring down the housing market as well?
Bob Wiedemer:
Absolutely.
We have nearly one out of every three homes in this country underwater on their mortgages.
And we've got
possibly 1.5 million more foreclosures that could hit the market in
just the next few months, with more and more coming.
That'll drive down prices.
Now, when
aggressive inflation strikes, the Fed won't respond with gradual
interest rate increases, instead they'll aggressively hike them.
So a stock market crash, serious inflation, and then crippling interest rate hikes are all coming.
Add in this dangerous Currency War, and a seismic collapse is inevitable.
John Burke:
Bob, can you stick around?
I'd like to bring you back later for a few more questions.
Bob Wiedemer:
Absolutely, John.
John Burke:
Great.
By now you've seen how vulnerable our economy and your wealth are to the looming threat of escalating Currency Wars.
So you may be wondering how you can stay safe.
Fortunately,
in a few minutes we'll be rejoined by Steve Forbes and Bob Wiedemer, as
well as global currency specialist Sean Hyman.
They are going to reveal the next steps to take with your personal finances and investments.
Plus,
at this broadcast's conclusion, you can receive a package that contains
all of the evidence we've presented today, a book that is quietly
circulating around Congress and the National Intelligence Community, and
investment reports to help you prepare for the ongoing Currency War.
Now, let's meet up with James Rickards at the Chinese Embassy. Part 5: The Showdown at the Chinese Embassy James Rickards Creates a Currency War Simulation Location: Chinese Embassy, Washington, D.C. Present at Location: James Rickards — AdvisEr to CIA, Pentagon, and Director of National Intelligence Ted Goldenberg — Newsmax Investigative Reporter
Ted Goldenberg:
The only
people who saw your Currency War simulation first hand, were
high-ranking members of the Pentagon and intelligence community.
So, can you walk me through a similar scenario?
James Rickards:
If I lay this out for you, I want to make it clear, this is hypothetical and extreme.
We'll start with the players and the back-story.
Situation 1, Israel and Iran are on the brink of war.
We're assuming that either new information has come to light, or that Iran went off the deep end.
Situation 2,
tensions between China and the U.S. are growing as both countries accuse
the other of waging a Currency War with excessive money printing and
quantitative easing.
China reads
the tea leaves and decides they need 4,000 metric tons of gold in order
to go toe-to-toe with the U.S. in any kind of financial showdown.
So, they
continue to order their mines across the globe to directly deliver gold
to their government and under military supervision, so there are no
leaks.
Let's say from 2009 through today, they've secretly stacked up 2,000 tons, and they aren't telling anybody.
They still need another 2,000 tons.
Now this is where the $1.4 trillion war chest in China's Sovereign Wealth Funds come into play.
A
few years back, using backchannels and money from their Sovereign
Wealth Funds, China sets up a seemingly unconnected web of hedge funds
in the Cayman Islands, Malta, Cypress, places like this.
So for years they play the long game, acting as a sleeper cell.
Most of the day-to-day investing is on the up and up.
But what this web of hedge funds has also been doing is gradually buying up more and more blocks of gold futures contracts.
Futures are derivatives that use leverage to cheaply control large amounts of an investment.
To give you an idea, if you were to invest $1 in a gold futures contract, you could control $15 worth of gold.
Now when
those contracts are up, China can close them out, roll them into new
ones, or, and here's where it gets interesting, they could take physical
delivery of the gold itself.
So, let's say
through this web of hedge funds, China is holding futures contracts
that control an additional 2,000 metric tons of gold.
They've got their magic 4,000 number, but nobody knows it.
So situation 1, Iran and Israel on the brink of war.
Situation 2, tensions between U.S. and China, with China secretly stockpiling massive amounts of gold.
That's the backstory.
Ted Goldenberg:
Given what you've already revealed, that doesn't sound impossible.
James Rickards:
Now let's run the war games simulation.
Day 1
Friday, 3 AM, Tel Aviv.
Friday, 3 AM, Tel Aviv.
Fearing for their safety, Israel launches a surprise strike on Iranian nuclear facilities using air raids and cyber warfare.
7 AM, Tehran.
Iran strikes back by closing the Strait of Hormuz with mines, blocking off over a third of the oil on the sea.
They then launch intermediate range missiles at Israel.
Day 2 and 3
Saturday and Sunday
Saturday and Sunday
War escalates in the Middle East.
Day 4
Monday, 8 AM, London.
Monday, 8 AM, London.
Oil prices have surged to $200 a barrel.
Gold hits $2,500 an ounce.
China's gold futures contracts are now controlling north of $176 billion worth of physical gold.
Panic causes the euro to collapse in value.
Day 4
Noon, Washington, D.C.
Noon, Washington, D.C.
The President addresses
the nation, declaring that the U.S. military will do whatever it takes
to protect Israel and reopen the Strait of Hormuz.
Day 5 Tuesday
The collapse in the euro is now leading to a loss in confidence of all paper currencies.
Fear spreads throughout the international community that all major economies could sink into a Great Depression.
This time the world doubts the ability of the Fed and European Central Banks to rescue the economy.
The recession revealed how fragile America really is.
Gold hits $3,000 an ounce.
The Chinese stake is now at $212 billion.
Day 6Wednesday, 9 AM, Beijing
The Politburo of the Chinese Communist Party meets to discuss their options.
They're
feeling the strain of the price hikes to oil, and given their current
tension with the U.S., they have serious doubts in our economy and
dollar.
From China's perspective, gold is the safest bet.
Their gold futures contracts expire in a week, and they've decided they want to take possession of all 2,000 tons.
Secret cables are sent to this Chinese embassy behind us informing the diplomats of the decision.
However, a CIA asset in Beijing learns of their plan.
Immediately the President, Treasury Secretary, CIA Director, and Fed Chairman gather to consider China's gold play.
They know there isn't enough gold available in the markets to meet China's demand.
They can't show their cards yet, but they start debating the options.
Day 7
Thursday, 9 AM, New York
Thursday, 9 AM, New York
China's secret web of hedge funds begins giving notice that they demand physical delivery for their gold futures contracts.
Gold becomes difficult to obtain and hits $3,500 per ounce.
China's stake is now worth $247 billion.
Oil hits $300 a barrel as the conflict in the Middle East continues.
More paper currencies collapse around the world causing global panic.
Day 7
Thursday, 5 PM, New York
Thursday, 5 PM, New York
Under direction from the White House, the Fe Fed holds emergency meetings with COMEX — who oversee gold futures contracts.
Day 8
Friday, 6 AM, New York
Friday, 6 AM, New York
COMEX uses its emergency powers to freeze gold at $3,500 per ounce.
And, as a direct strike to China's interests, bans physical deliveries of gold on futures contracts.
COMEX has the power to do this.
Day 9
Saturday, 7 AM, Beijing
Saturday, 7 AM, Beijing
China reacts to this decision by declaring it an act of financial warfare that's been orchestrated by the U.S. government.
Markets are
already fragile, because of the situation in the Middle East, and major
economies are on the brink of depression, because of the oil price
spike.
Day 10
Sunday, 11 AM, Beijing
Sunday, 11 AM, Beijing
The conflict between Iran and Israel is slowing down as the United Nations intervenes to expedite a cease-fire.
But in China, the Currency War is about to escalate dramatically.
The Chinese leadership feels they are backed into a corner.
They realize
they can't dump their $1.2 trillion in U.S. Treasurys because the
President would freeze the market, and that would be mutually assured
financial oblivion.
But they do have another financial weapon of mass destruction on the table.
Because, as the Currency Wars were heating up with America, they weren't just stockpiling gold futures contracts.
They also had their web of hedge funds take positions in a separate block of highly leveraged derivatives.
Their Sovereign Wealth Funds put $150 billion in play here, which is controlling $2.25 trillion worth of investments.
Suspecting their original plan was compromised due to a security leak so, China takes precautions to ensure this is kept quiet.
Day 11
Monday, 10 AM, New York
Monday, 10 AM, New York
Out of the blue, China orders this web of hedge funds to sell these secret holdings at the same time.
In one single day, they dump the equivalent of the entire GDP of India, or Canada, or Russia off on Wall Street.
An economic Pearl Harbor we never saw coming.
Americans panic, the Dow plunges, our dollar is decimated.
The contagion spreads to London, Tokyo, everywhere.
There is a run on banks as everything starts collapsing.
Trading is frozen on Wall Street.
But, China is not done.
Thanks to Washington, D.C., they're tapped into our Fed Wire and Treasury auction network.
So their
hackers unleash a cyber-warfare attack on the U.S. to disrupt our
financial exchanges, bank transactions, the power grid, and our Internet
backbone.
Day 11 Monday, 1 PM, Washington, D.C.
This time, the White House and Pentagon meet, and all options are on the table.
This is a one-in-a-million kind of situation.
But with my help, it's exactly the kind of crisis the Pentagon and National Intelligence Community prepare for.
Ted Goldenberg:
What you just described sounds like something out of a movie.
So, that was the extreme scenario.
What is a more realistic outcome in your eyes, given America's current path?
James Rickards:
Let me be very clear, the United States' role in this Currency War is
setting the stage for a global financial meltdown.
Today, the
risk is not only of a serious panic or a depression like what occurred
during the first Currency War, but also of a collapse of the entire
monetary system.
Americans lost $50 trillion from the recession, nearly 40% of their net worth on average.
I believe the outcome of this currency war could be twice as bad . . . or worse.
America is nowhere near a real recovery, despite what Washington says.
So what final QE number we see, whether it's four, five, 10, I have no idea.
But the Fed's not done.
China's economy is slowing down.
Europe is a heartbeat away from economic Armageddon.
So we face a future of more money printing, more monetary easing, and more Currency War aggressions across the globe.
For the United States, I personally feel we are going to be hit by strong inflation in the coming years.
4% a year will rise to 8%, then 10%, then possibly 20%, and from there it could get worse and worse.
I think the stock market is in another bubble and I could see another large crash coming of at least 50%, within three years.
And I think the dollar's days as the world's reserve currency are coming to a close.
This is just with our current path.
We don't need any of the unconventional currency war weapons to come into play.
But just imagine if they do.
I think if Americans become more aware of this situation, they'll be able to take measures to protect their financial security.
Because that needs to begin immediately.
Part 6: Roundtable Discussion Preparing
Your Savings, Finances, and Way of Life
For Currency War Escalations
Your Savings, Finances, and Way of Life
For Currency War Escalations
Location: Newsmax Studio, NY.
Present at Location:
Steve Forbes — Chairman, Forbes Media
Bob Wiedemer — Economist, NY Times Best-Selling Author of Aftershock
Sean Hyman — Global-currency specialist
James Rickards (via satellite) — Adviser to CIA, Pentagon, and Director of National Intelligence
John Burke — Host
Present at Location:
Steve Forbes — Chairman, Forbes Media
Bob Wiedemer — Economist, NY Times Best-Selling Author of Aftershock
Sean Hyman — Global-currency specialist
James Rickards (via satellite) — Adviser to CIA, Pentagon, and Director of National Intelligence
John Burke — Host
John Burke:
You've just witnessed a controversial investigation into the rise of global currency wars.
Now it's important you get the guidance you need, so you can take measures to protect your wealth.
That's why, coming back to join us is Bob Wiedemer.
Bob, thanks.
Bob Wiedemer:
Glad to be here.
And Steve Forbes, thank you for staying with us.
Steve Forbes:
My pleasure.
John Burke:
And from outside the Chinese Embassy, I have James Rickards on the line.
James can you hear us?
James Rickards:
Loud and clear John.
John Burke:
Also, joining us now is global-currency specialist Sean Hyman.
Sean provides investment advice to some of the world's wealthiest individuals.
And he lends his expertise to CNBC and other major financial shows.
Sean Hyman, thank you for taking part in this discussion.
Sean Hyman:
My pleasure, John.
John Burke:
Sean, let me start with you.
You've been backstage watching James' investigation.
So let me get your take.
How concerned does the average American need to be with the current state of this global currency war?
And what role does it play in the future of the American economy?
Sean Hyman:
I can say with absolute certainty that what James exposed today is a very serious threat to the prosperity of average Americans.
The U.S. is intentionally devaluing the dollar.
Since the mid-1980s alone, it's lost over 50% of its value.
That means folks have lost half their net worth from one D.C. gamble after another.
So right
there you have a situation where you are forced to make aggressive
returns on your investments, just to keep your head above water.
And then when
you add in inflation, stagnant wages, and the price hikes to
commodities like oil and food, the impact of this Currency War can be
truly understood.
That's not even taking into consideration those alarming unconventional threats James talked about.
John Burke:
Now, let's
focus on how average Americans should go about both defending their
wealth and growing it during these uncertain times?
Steve, let's start with you.
What big opportunities do you see out there?
Steve Forbes:
Well
I think for a portfolio you should have 5-10% in something like gold.
Not so much as an investment. But as an insurance policy. Who knows what
they'll do next in Washington.
You should have a certain amount in cash because you never know what needs may arise and opportunities may arise.
But an area
to look at, if you can take a two-year time horizon and have a strong
stomach for it, is American equities. They're grossly undervalued.
Stocks have
gone nowhere since the late 1990s. We're due for a change. Remember the
80s? Everyone thought the world was coming to an end? And guess what
happened: We had a 15-fold increase in stocks in the next 20 years.
So even though there's going to be turbulence, you've got to look ahead.
Remember, your portfolio is going to outlast the kind of crazy things we see in Washington, Europe, and elsewhere.
John Burke:
James, obviously most of this broadcast centered around your findings.
So how do people go about preserving their hard-earned money if this Currency War threatens to eradicate their wealth?
James Rickards:
I think you have to be very careful moving forward.
I'd suggest 10% of a person's wealth on the low end, 20% on the high end be allocated to precious metals like gold.
I think it'd be wise to have some exposure to foreign currencies in your portfolio as well.
But choose ones that are in countries that have strong natural resources backing them like the Australian and Canadian dollars.
I also think focusing on some international stocks is a wise move.
They'll offer safety even if the market collapses.
Again, you could look to Canada again there.
John Burke:
Bob, you are a strong proponent of Americans making sound personal finance decisions?
What should people prioritize right now?
Bob Wiedemer:
I'd say that folks should refinance their mortgages now while the rates are really low.
Don't hold off on this.
Especially, if you aren't in a fixed-rate mortgage.
When inflation hits us really hard, eventually the Fed will aggressively hike interest rates.
Now having said that, I don't advise Americans to pay a great deal over their minimum payment on their mortgages.
Because cheaper dollars in the future equal cheaper debts.
Instead, I'd say they use the money they saved from refinancing to pay down credit card debt and car payments.
Prioritize these.
Credit card
debt can be dangerous because, in the fine print, credit card companies
can hide clauses that allow them to hike your rates.
For life insurance think term life, over whole life insurance.
Those are just some quick tips.
John Burke:
Sean, where do you think Americans should be focusing their investment capital?
Sean Hyman:
I'll make it simple.
The two C's — currencies and commodities.
This echoes a good bit of what James just mentioned.
The Canadian Dollar has an ETF that trades on the U.S. exchanges.
Its ticker is the FXC.
The ticker for the Australian dollar's ETF is the FXA.
I'd also suggest looking at the New Zealand dollar.
Over the long haul, these should be pretty strong.
As for commodities, gold and oil are sure things for a long-term rise.
But, they can have periods of dramatic pullbacks and volatility.
We've all seen this firsthand, so you've got to time that right.
John Burke:
So, in your opinion, how should folks play gold?
Sean Hyman:
If you want to invest in gold, without buying bullion or coins, you can go the simple route and invest in gold ETFs.
Most people are aware of the GLD.
But I'm not as excited about this one.
The benefit that's always sold to GLD investors is they can get physical gold for their holdings whenever they want.
But that's only true if you have over $15 million invested, or are a major institution.
If you are an average investor, you can never get real gold if you want it.
Plus, there are some rumors floating around that the GLD doesn't even have all the gold in its possession that it claims.
As an alternative, an ETF is launching in 2013 called the Merk Gold Trust.
Its ticker will be OUNZ.
It's not out yet, but it is going to allow people to redeem their ETF shares, even if they only control one ounce of gold.
So it's one to keep an eye on.
Another GLD alternative is the Central Fund of Canada.
Its ticker is CEF.
There's also a whole list of gold-mining companies worth focusing on.
If you want to buy an ETF that covers a lot of them in one shot, the GDX is a good place to go.
John Burke:
Steve Forbes, Bob Wiedemer, your contributions to this broadcast today were immeasurable.
Thank you for taking part.
Steve Forbes and Bob Wiedemer:
Thank you.
John Burke:
James and Sean, I'd like to talk to the both of you for a few moments.
You have recently joined forces to address this serious threat we investigated today.
And you've put together, what you are calling, the Currency Wars Defense Blueprint.
Let's discuss that.
James Rickards:
Since a
Currency War first attacks your wealth through a combination of
inflation, rising energy and commodity prices, higher unemployment, and
other severe hardships, you need to build up layers of defense around
your personal finances and investments.
So, Sean and I felt this package should include both the real story and real solutions.
John Burke:
So to help
people get the real story, you are including a copy of your NY Times
best-selling book Currency Wars: The Making of the Next Global Crisis.
USA Today has called this book an invaluable resource.
Bloomberg said this was one of the scariest books they've read this year.
And Forbes stated this book may be as important for our era, as Paul Revere's midnight ride for American independence.
Referring to
some of the seemingly classified information you reveal, Forbes' review
also wondered, and this is a direct quote, "Who the hell cleared this?"
Recently,
Senator Tom Coburn warned Americans that we may soon lose our currency,
and then he publicly recommended everybody read Currency Wars.
Now, you've just finished an unpublished chapter of Currency Wars that you are including in this package today.
Could you tell me about this?
James Rickards:
Since my book was first published we've seen more currency aggressions, more monetary gambles, and some new threats.
So I use this
new chapter to update the situation and include some of my more
controversial views. But I also include investment guidance I feel can
help during this Currency War.
John Burke:
And just to be clear, this unpublished chapter isn't available anywhere but here.
James Rickards:
That's correct.
My publisher has not even seen it.
John Burke:
Sean, can you discuss the reports that are included in this Currency Wars Defense Blueprint?
Sean Hyman:
When many investors first hear the true scope of this Currency War, their instincts could lead them in one of two directions.
Either a rush towards investments that carry massive upside potential, but the downside risks are just as bad, if not worse.
Or, they may
only focus on ultra-conservative opportunities that really aren't that
safe when you consider that their meager returns will lose money as
inflation strikes, and our dollar weakens.
So with these reports we set out to create a clear path.
One that provides enough profit potential to give you a serious return, without folks having to take on unnecessary risk.
John Burke:
Okay, walk me through each report.
Sean Hyman:
The first report is called "Currency Wars: The Early Offensive."
Here James
and I give average Americans simple and cost-effective ways to add
international-currency exposure to their portfolios.
The dollar is temporarily being propped up by the European crisis.
But eventually the markets will figure out that our debt situation here, is even worse than over there.
But right
now, while the U.S. dollar is artificially strong, folks should use it
to their advantage, and get in to some safe and solid global currencies.
Now I'm not talking about risky or leveraged investments like FOREX.
This report focuses on three easy and stable currency investments in three countries, Australia, South Africa, and Brazil.
Economies that are backed heavily by gold and natural resources.
And all three picks offer safe, profit potential between 20% and 85% in the short term.
Plus, you can buy them quickly with an online account or through your regular broker just like stocks.
The second report we call "Currency Wars: A Prolonged Conflict."
You can see from history that Currency Wars can last 20 years or longer.
So here,
James and I specifically set out to identify long-term investments, best
suited for an enduring Currency War between the U.S., China, and the
rest of the world.
We're focusing primarily on commodity plays like precious metals, food, and energy.
For example, the report shares an agricultural fund we believe could return 40% in the near term.
Another investment focuses on coal.
Coal is getting a bad rap in America, but it still controls 30% of the world's energy market.
That's the highest rate it's been in 40 years.
And as China and India continue to develop, they will lean more and more on coal, because it's cheap.
So we've targeted a coal ETF that, our analysis shows, could return 102% or more.
Natural gas is another interesting opportunity, especially where Europe is concerned.
Now you've got Germany transitioning away from nuclear power.
You've got all of Europe trying to lessen their dependence on oil.
So they're targeting natural gas because, like coal, it's cheap and plentiful.
We've found a natural gas company in Norway our research leads us to believe is sitting on an 84% return on the low end.
Now, as James discussed during the investigation, gold will play a big role in this Currency War.
And we both believe it could hit $3,000 or $5,000 an ounce or more, with silver's rise following right behind.
So this
report also documents gold and silver ETFs that could return as much as
70% in the short term, and their long-term potential is limitless.
We also have discovered a lucrative mining company that focuses on gold, silver, and the highly coveted, rare earth metals.
There are eight total investments in this second report.
Now, the third report is called, "Currency Wars: 24 Hours at a Time."
It focuses on
some of the day-to-day personal finance decisions Americans will face
during the early and later stages of this Currency War.
We discuss
what debt to prioritize paying off, what type of life insurance to
carry, what kind of careers will be the safest, and how to make sure you
have enough money for a safe retirement in unsafe times.
John Burke:
This is truly a comprehensive solution.
One I feel is critical for Americans during these troubling times.
The conservative value of the Currency Wars Defense Blueprint is $116.
And you can get it today by joining James and Sean in the revolutionary new publication, the Ultimate Wealth Report.
James, tell me about the Ultimate Wealth Report.
James Rickards:
The Currency War is happening right now.
It's going to take a long time to play out, and the outcome is completely unknown.
So what Sean
and I set out to create was an entirely new way to deliver the necessary
intelligence and investment guidance people need in order to get a true
read on the world we live in.
So, with the Ultimate Wealth Report we focus on our particular areas of expertise to accomplish this.
Sean Hyman:
Let me speak to what James just said.
James is
currently a military adviser, a consultant to the Director of National
Intelligence, and the senior managing director of a Threat Finance &
Market Intelligence firm that was founded by former CIA members.
But, he's also spent over three decades as an investment banker and portfolio manager.
So I believe he can provide a fairly unique viewpoint on the world and the markets.
James Rickards:
And most people know Sean as one of the world's premier international currency traders.
But his knowledge of all investments, precious metals, energy, stocks, is unprecedented.
Anybody who watches the financial news programs has most likely seen him discussing the markets.
That's why I'm excited to team up with him on the Ultimate Wealth Report.
John Burke:
Now, what I really like about the Ultimate Wealth Report is that it has two distinct parts to it.
Part one focuses on James' research into issues like Currency Wars.
This is what he does for a living.
There is a reason the Pentagon and national intelligence community look to him for answers.
It's rare that somebody with access to, oftentimes, classified intelligence comes out to share their viewpoints.
And then, the
other part of the publication focuses on sharing investment
opportunities you feel can offer the best combination of wealth
protection and profit opportunities.
Sean Hyman:
You summed it up perfectly.
We could be targeting currency ETFs and commodity stocks one month.
And then gold plays and international dividend opportunities the next.
Plus, to go with the publication, we also send weekly videos and market commentary to subscribers.
We've created a members-only website where we keep special news events and archives.
And there's also a library of bonus reports that contain some exciting investments.
John Burke:
The Currency
Wars Defense Blueprint and the Ultimate Wealth Report form a complete
solution that provides the support Americans need.
James
Rickards, a special thank you for agreeing to put together this
investigation, and for sharing your insights into the rise of global
Currency Wars.
James Rickards:
I'm happy to get the word out.
John Burke:
And Sean Hyman, thank you for taking part in this critical discussion today.
Sean Hyman:
It's my pleasure.
John Burke:
Now is the
time to take the necessary measures towards protecting your wealth and
way of life from the impact of this Currency War.
You will be
instantly mailed the Currency Wars Defense Blueprint when you accept a
one-year, 100% risk-free subscription to the Ultimate Wealth Report for
only $47.
And to make sure this opportunity is right for you, Newsmax is proud to offer you an ironclad guarantee.
Take the next
120 days to review the next four issues of the Ultimate Wealth Report,
every weekly video and member communication, as well as the exclusive,
members-only website, which contains a library of powerful bonus
reports.
If
at any time, for any reason during those first four months, you feel
this publication isn't right for you, simply contact us, and you will
receive a complete refund.
This way you
only pay if the Ultimate Wealth Report is providing you with the
guidance you need to stay safe and profit during these uncertain times.
And, regardless of your decision, you can keep the Currency Wars Defense Blueprint as our way of saying thank you.
This concludes our investigation.
It's now time
for you to take the next step towards protecting you and your family
from the dangerous threat of global currency wars.
I'm John Burke.
Stay Safe.
China’s ghost cities epitomize the problem with printing money Paul Krugman-style
Throwing seed money into empty cities doesn't sprout a healthy economy. Reuters/David Gray
In a recent article in
Quartz, Gwynn Guilford made the crucial point that the turbulence in
China’s financial system is a debt crisis, not a liquidity crisis. She
explains:
What it means is that China’s massive stimulus from 2009 to 2011 sunk money into projects that are generating little or no returns. The continuing gush of credit allowed companies to paper over these losses by covering their bad debts with new loans…But whatever the size [of China’s indebtedness], it’s now big enough that the system needs colossal amounts of liquidity even to keep above water.
This
paragraph explains not just the reality of China’s economic problems
but also that of the United States, Europe, Japan and most other
countries in the world. The problem is that resources have been
misallocated as a result of the orgy of monetary creation that the
central banks of the world enjoyed during the last several years—mind
you, not just after 2008, but for at least a decade and a half before.
By
doing this, they pushed money into activities that were profitable only
under the artificial conditions created by unsustainably low interest
rates and excessive levels of liquidity in the banking system. This was
the case in China, where the huge amounts of liquidity created by the
People’s Bank of China in the aftermath of the 2008 global crisis found
their way into (surprise, surprise!) capital market speculation and
enormous real estate projects that can be accurately described as white
elephants. This was exactly what had happened in the US when, as shown
in the graph below, Alan Greenspan caused the massive dot-com boom and
bust, and then, to get out of it, the even more massive booms and busts
of the housing markets, stock markets and commodity prices that all
collapsed in 2008. Then, Ben Bernanke did the same, creating a third
stock market boom and a second commodities boom, which at this moment is
in danger of exploding into an unprecedented collapse.
Source of basic data: International Financial Statistics of the International Monetary Fund and Professor Robert Shiller at Yale
The
same happened in Europe, where the huge liquidity created by the
European Central Bank went to finance the unsustainable deficits of the
PIIGS (the countries in the periphery of Europe, Portugal, Ireland,
Italy, Greece and Spain). The same happened in Japan, with real estate
loans in the late 1980s.
In each of these episodes in the US,
Japan, Europe and China, enormous losses were discovered, but most of
them were papered over by issuing more liquidity.
But, what does it mean to paper it over?
Financial
intermediation has two sides. On the one side, financial institutions
borrow money and on the other they lend it. The problem arises when they
lend to unsustainable activities that cannot repay their obligations.
When, for whatever reason, increasing numbers of borrowers become unable
to service their debts, the banks become illiquid—that is, short of
cash because they have to pay their own obligations and the loans in
which they have invested them are not producing. When banks become
illiquid, they fail. In these circumstances, central banks create
liquidity (that is, money) and give it to the banks to prevent their
failure. The banks pay their obligations with the currency they get from
the central bank, not from the cash generated by their loans, which is
insufficient because the loans have turned bad.
This appears to be
a wonderful solution because it seems painless. Who cares if the banks
are insolvent if they are liquid and can keep on operating with central
bank money? The problem is that, to keep on going, banks have to lend
the money to the bad borrowers—those who cannot repay their
debts—because these are the ones that could bring them to bankruptcy.
Take the example of Greece. The country cannot repay its debts. If it
defaults, most German and French banks would fail. Thus, the banks
pretended that Greece would repay, and kept on providing loans
(liquidity) to it, so that it could service their already bad loans
because if they failed to do so, the banks themselves would go bankrupt.
The snag is that refinancing an insolvent borrower is like throwing
cash in a bottomless pit. To pretend that Greece stays current with its
obligations, you have to give it the money it needs to service the
current debt, plus the interests, plus additional financing to cover its
fiscal deficit (that is, Greece keeps on spending more than it
receives, and you have to finance this difference to pretend that it is
solvent). Of course, this is throwing good money after bad, but for the
sake of protecting the banks all central banks have done it. Since the
loss makers that receive such attention from the banks are like
bottomless pits, the debts skyrocket and grow like snowballs, turning
worse every day.
If you want to see how this works, look at the
next graph. Note that the Greek crisis exploded in 2008, when it became
clear that Greece could not repay its debts. At the time, the debt was
equivalent to 100% of GDP. Now notice that after that, as a result of
the high-sounding rescue programs, the debt of Greece has increased to
become 180% of GDP. In fact, the really impressive escalation of debt
has taken place since the rescuers (the IMF, the European Commission and
the European Central Bank) began to help Greece to reduce it. Do you
think it is easier to repay 180% of GDP than 100% of GDP? Do you think
that the rescuers have really been trying to help Greece?
Source of basic data: World Economic Outlook of the International Monetary Fund
In
fact, they have been helping their bankers to survive one more day even
if they are bankrupt. However, in the meantime, the problem has become
worse, because the amount that can be recovered from Greece is smaller
by the day. By keeping the insolvent banks liquid, the central banks are
helping them to become even more insolvent in a game in which the banks
are expecting that eventually the government will have to absorb all
their losses through other means (that is, not lending them liquidity
but giving the cash away to them).
The Federal Reserve has been
doing that by purchasing $85 billion monthly in securities mostly owned
by the banks, many of which could be of doubtful recovery (you cannot
check the quality of the securities when buying such incredibly large
amounts). The banks receiving the cash in exchange for these doubtful
securities are not lending it to the private sector. As shown in the
next graph, they are depositing it back in the Federal Reserve (banks
net claims on the Fed) in what seems to be a purposeless exercise: The
Fed creates money and gives it to the banks, and the banks deposit the
money back at the Fed. The Fed insists that there is a purpose—that
is, encouraging credit—but credit to the private sector remains $820
billion lower than in 2008, even if the money created by the Fed is $1.7
trillion higher. What could be the purpose of this? The banks are
exchanging doubtful securities for good cash deposited at the Fed. That
is not liquidity creation, it is a transfer of wealth.
Source of basic data: International Financial Statistics of the International Monetary Fund
Thus,
we can summarize the results of the orgy of monetary creation that has
overtaken the central banks of the world in three categories.
First,
it helped zombie banks to keep on operating while they were bankrupt.
In the process, the debt problems have snowballed as the logical result
of throwing bad money after good money.
Second, more than helping
to keep credit to the private sector flowing, the enormous Quantitative
Easing monetary creation programs of the Fed may be solving the problems
of the bankers, which, though they currently have insolvent banks, may
emerge from the crisis having good banks.
Third, the credit that
has trickled down to the private sector has produced a series of
bubbles, some of which have already exploded. Some others are about to
explode. The bubbles are extremely damaging because they direct
resources toward activities that are bound to fail when normal
conditions return. This is absolute waste.
There is no better
example of such waste than the ghost cities built in China with the
enormous amounts of money created by the People’s Bank of China in the
wake of the 2008 crisis. The People’s Bank did that in the spirit of
Nobel laureate Paul Krugman, who promotes monetary creation as the cure
of all ailments. Krugman went to such extremes as to say, in a Fareed Zakaria GPS
Sunday program, that preparing the defense against a potential space
alien invasion would end the slump in 18 months, just because the
spending would excite the economy. We don’t have to imagine a potential
invasion of Martians to see what would be the result of Krugman’s
recommendations. We can just go to China and see the ghost cities built
with the two or three trillion dollars of money created by the People’s
Bank of China. They are large and pretty but, as shown in a recent 60 Minutes
report, nobody lives there. They have become costly monuments to the
horrendous waste that unbridled monetary creation generates.
In
attention to the inspiration that Krugman has given to these kind of
monuments (some of them alive, like Greece, some of them made of cement
and steel), the Chinese government should baptize these giant white
elephant “Krugman cities,” so that future generations do not forget what
is the cost of printing money in Krugman’s style.
We welcome your comments at ideas@qz.com.
Economic Espionage
Introduction
The Cold War is not over, it has merely
moved into a new arena: the global marketplace. The FBI estimates that
every year billions of U.S. dollars are lost to foreign and domestic
competitors who deliberately target economic intelligence in flourishing
U.S. industries and technologies, and who cull intelligence out of
shelved technologies by exploiting open source information and company
trade secrets. Foreign competitors who criminally seek economic
intelligence generally operate in three ways:
- They aggressively target and recruit insiders (often from the same national background) working for U.S. companies and research institutions;
- They conduct economic intelligence through operations like bribery, cyber intrusions, theft, dumpster diving (in search of discarded intellectual property or prototypes), and wiretapping; and,
- They establish seemingly innocent business relationships between foreign companies and U.S. industries to gather economic intelligence, including trade secrets.
In an effort to safeguard our nation’s economic secrets, the Economic Espionage Act (EEA) was signed into law on October 11, 1996.
How to Protect Your Business from Espionage: Six Steps
- Recognize there is an insider and outsider threat to your company.
- Identify and valuate trade secrets.
- Implement a proactive plan for safeguarding trade secrets.
- Secure physical and electronic versions of your trade secrets.
- Confine intellectual knowledge on a “need-to-know” basis.
- Provide training to employees about your company’s intellectual property plan and security.
Definitions
Economic Espionage is
(1) whoever knowingly performs targeting or acquisition of trade
secrets to (2) knowingly benefit any foreign government, foreign
instrumentality, or foreign agent. (Title18 U.S.C., Section 1831).
Trade secrets are all
forms and types of financial, business, scientific, technical, economic
or engineering information, including patterns, plans, compilations,
program devices, formulas, designs, prototypes, methods, techniques,
processes, procedures, programs, or codes whether tangible or
intangible, and whether or how stored, compiled, or memorialized
physically, electronically, graphically, photographically or in writing,
which the owner has taken reasonable measures to protect; and has an
independent economic value. “Trade secrets” are commonly called
classified proprietary information, economic policy information, trade
information, proprietary technology, or critical technology.
Theft of trade secrets
occurs when someone (1) knowingly performs targeting or acquisition of
trade secrets or intends to convert a trade secret to (2) knowingly
benefit anyone other than the owner. Commonly referred to as Industrial
Espionage. (Title 18 U.S.C., SECTION 1832).
A Foreign Agent is any officer, employee, proxy, servant, delegate, or representative of a foreign government.
A Foreign Instrumentality
is defined as: (1) any agency, bureau, ministry, component,
institution, or association; (2) any legal commercial or business
organization, corporation, firm, or entity; and, (3) substantially
owned, controlled, sponsored, commanded, managed or dominated by a
foreign government.
Statutory authority: The Economic Espionage Act (EEA) of 1996
TERRITORIAL LIMITS: EEA
protects against theft that occurs either (1) in the United States,
or (2) outside the United States and (3) an act in furtherance of the
offense was committed in the United States, or (4) the violator is a US
person or organization.
What are some methods of targeting or acquiring trade secrets?
1. Steal, conceal, or carry away by fraud, artifice, or deception;
2. Copy, duplicate, sketch, draw, photograph, download, upload, alter, destroy, photocopy, replicate, transmit, deliver, send, mail, communicate, or convey; and, 3. Receive, buy, or possess a trade secret, knowing the same to have been stolen or appropriated, obtained, or converted without authorization.
2. Copy, duplicate, sketch, draw, photograph, download, upload, alter, destroy, photocopy, replicate, transmit, deliver, send, mail, communicate, or convey; and, 3. Receive, buy, or possess a trade secret, knowing the same to have been stolen or appropriated, obtained, or converted without authorization.
Does the Economic Espionage Act of 1996 apply if the offender is a foreign person?
Yes. The Act states that
(1) whoever knowingly performs targeting or acquisition of trade
secrets to (2) knowingly benefit any one other than the owner. Other
elements will apply for prosecution.
Does the Economic Espionage Act of 1996 apply if it occurs outside the United States?
Yes. However, the violator
must be (1) a US person or organization; or (2) an act in furtherance
of the offense was committed in the United States.
Are there other statutes
that can apply if trade secrets are not classified and therefore cannot
be prosecuted under the Economic Espionage Act of 1996 Title 18 U.S.C.
Section 1831 and 1832?
Yes. The following is a
list of violations that may apply: mail fraud, wire fraud, interstate
transportation of stolen property, export control, and misuse of a
computer system. Contact your local FBI for further assistance.
Is the FBI proactive in its approach to economic espionage?
Yes. FBI Director Robert
Mueller has designated counterintelligence as the FBI’s number two
priority , second only to counterterrorism. The Economic Espionage Unit
is dedicated to countering the economic espionage threat to include
developing training and outreach materials; participating in
conferences; visiting private industry; working with the law
enforcement and intelligence community on requirement issues; and
providing specific classified and unclassified presentations.
How to Contact Us
To report violations, please contact your local field office or your nearest U.S. embassy or consulate overseas.
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