Friday, April 25, 2014

Currency War Will Decimate Dollar. This Will NOT Be Good.

Money Manager Mirhaydari: 'We're on Cusp of Currency War'

Friday, 25 Apr 2014 07:06 AM

By Dan Weil

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The currency market isn't looking too stable, says Anthony Mirhaydari, founder of the Edge investment advisory newsletters and Mirhaydari Capital Management.

Indeed, "we're on the cusp of an outright currency war, . . . as central banks in all the major economies actively work to weaken their currencies to boost exports, their economies and keep pushing inflation higher," he writes in an article for MarketWatch.

It amounts to "a race to the bottom," Mirhaydari declares.

The new element of the equation is that both China and Europe are pushing their currencies lower to spur economic growth, he notes.

The European Central Bank has begun to talk about purchasing bonds, which roiled the U.S. stock market earlier this month, Mirhaydari states.

In the United States, "new Federal Reserve chairman Janet Yellen seems ready and willing to keep the dollar down by holding short-term [interest] rates lower for longer until both inflation returns to the Fed's 2 percent target and alternative measures of labor-market health, such as wages, recover," he argues.

"That will keep the pressure on the dollar."

The currency war could make things ugly for stocks, Mirhaydari insists.

"The takeaway: A market that's grown complacent because of the steady drop in the yen is about to be rattled as Europe, China and others join Japan in actively weakening their currency. It's not going to be pretty."

Meanwhile, massive central bank easing will doom the dollar, says James Rickards, author and managing director at Tangent Capital Partners.

He tells Bloomberg central banks are on a money-printing campaign to avoid deflation. "If you print enough money, you will collapse confidence in the dollar. The ultimate backing of the dollar is confidence."

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Sunday, April 13, 2014

Is Confidence In Dollar Restricted To The Amount Of Debt The Country Has?

'Death of Money' Author James Rickards: Dollar Headed for Collapse

Friday, 11 Apr 2014 07:34 AM

By Dan Weil

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The outlook is not good for the dollar, says James Rickards, author and managing director at Tangent Capital Partners. Indeed, the dollar is headed for collapse, he told Bloomberg.

"Deflation is the biggest problem in the world. The world wants to deflate," said Rickards, author of "The Death of Money: The Coming Collapse of the International Monetary System."

But central banks and governments are unwilling to tolerate deflation, he said. "It increases the debt-to-GDP ratio, destroys tax collection, creates bad debts and hurts the banks. So central banks will do anything to avoid deflation."

And what do they do? "They print money," Rickards said. "If you print enough money, you will collapse confidence in the dollar. The ultimate backing of the dollar is confidence. If you destroy confidence …"

As for the Federal Reserve, it's "insolvent on a mark-to-market basis," Rickards said. "An FOMC [Federal Open Market Committee] member told me that. . . . The insiders will tell you that privately, but they won't say it publicly."

Quantitative easing has pushed the Fed's balance sheet to $4.3 trillion.

The dollar is a "perpetual non-interest-bearing note issued by an insolvent central bank," Rickards said. "How long can that go on before people walk away from it?"

John Aziz, economics correspondent for TheWeek.com, takes issue with Rickards.

"It's certainly true . . . that confidence in the U.S. dollar is the key to the dollar remaining the world's leading reserve currency," he wrote.

"Rickards sees this confidence being perilously eroded due to the Federal Reserve's money printing. But confidence in the U.S. dollar is about more than just how many dollars there are in the system."

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