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Old 04-03-2016, 11:52 PM   #21
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Why US wants a cheaper dollar (not a crush but weaker) is because China wants a cheaper Yuan (Government still sets exchange rates), EU wants cheaper Euro (by doing QEs and implementing negative rates), Japan is doing their QEs to weaken the Yen etc. That is the Currency War Mr Rickards described in his book, all major Industrial Powers are trying to shift trade balance their way in a low or no world economic growth environment. Does not it makes sense?
In the interview I heard on the Financial Sense Newshour (see prior post for link), Rickert put together what seemed to me to be a pretty coherent, credible story. I don't put much faith in it though....you hear lots and lots of stories (including on this board) that make sense but just don't happen to be what really happens in real life. As one example, just read the recent discussions on this board about peoples various ideas on the impact of negative interest rates. Some very logical stories are there that just don't match what is happening in real life. Maybe life is just too complicated and whenever one thing happens, it has unintended consequences which botches up the nice theory we had...who knows?

My takeaway from Rickert's interview was that if he was right, we were all hosed. Having a small part of my portfolio in gold wouldn't do a whole heck of a lot. So I don't even plan to buy/read his book.
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Old 04-04-2016, 08:18 AM   #22
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In the interview I heard on the Financial Sense Newshour (see prior post for link), Rickert put together what seemed to me to be a pretty coherent, credible story.
Care to elaborate?
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Old 04-04-2016, 08:20 AM   #23
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Care to elaborate?
No. Those who are interested will listen to the podcast or read the article referenced by the OP.
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Old 04-04-2016, 08:34 AM   #24
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No. Those who are interested will listen to the podcast or read the article referenced by the OP.
Not sure why anyone would invest an hour of their lives listening to a pod-cast based on the info that's been offered up in this thread so far, but sure.
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Old 04-04-2016, 09:11 AM   #25
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I'm not 100% sure what an SDR is, so I'm guessing no, the USD will in fact remain important for a while.
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Old 04-04-2016, 10:36 AM   #26
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If it is in any way, shape, form or fashion related to Agora then it's questionable.
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Old 04-04-2016, 10:58 AM   #27
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I'm not 100% sure what an SDR is, so I'm guessing no, the USD will in fact remain important for a while.
SDR is Special Drawing Rights (a basket of world leading currencies) set by IMF in order to provide loans to International community in case of Financial crises or other temporary needs. Mr Rickards , so much criticized here, points out on our Fed Reserve Bank Balance sheet swollen to $4.5 trillions due to 2008 crises and following bail outs. Nobody denies that the Feds action helped to avoid a depression but if next Financial crises happen, the Feds cannot (in his view) to expand the balance sheet to $8 or $10 trillions as it may truly collapse the dollar). The IMF with their SDR could step in and bail out whatever crises may happen. Again, I am not sure how true all of it is but the IMF balance sheet is clear to act in case of similar to 2008 crises, therefor the SDR will be main reserve currency explains Mr Rickards. Portion of IMF assets are in physical Gold. That is as far as I understand it.
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Old 04-04-2016, 11:45 AM   #28
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I'm not 100% sure what an SDR is, so I'm guessing no, the USD will in fact remain important for a while.
Special Drawing Rights (SDRs) were created to solve a problem under a world monetary system that no longer exists. They're basically not used at all now for anything of any importance (but still find great purchasing power in the world of conspiracy theorists.)

Under the Bretton Woods international monetary system that existed from the end of WWII until 1971, exchange rates among world currencies were all fixed in relationship to the dollar. The dollar, in turn, was fixed at a set convertibility into gold.

Under Bretton Woods each member country needed to maintain reserves of dollars or gold which could be bought or sold in sufficient quantities to maintain their currency peg to the dollar.

In practice there wasn't enough gold or dollars to supply the world's need for reserves in an era of increasing global trade, so SDRs were created in 1969 as an alternative reserve asset.

This whole system collapsed a few years later in 1971 when the U.S. abandoned the gold standard.

SDRs are still around and total only about $200B in value. They are not a currency, though, in the sense that no one can use them to buy anything directly. Instead, SDRs represent a basket of 5 currencies (USD, EUR, JPY, GBP, and now CNY).

In order to use SDRs a member must find a willing partner country to trade their SDRs for one of the actual currencies represented by the basket. According to the IMF, such exchanges take "several days." So not the best mechanism for facilitating global commerce.
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Old 04-04-2016, 11:58 AM   #29
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This is Wikipedia SDR explanation:
https://en.wikipedia.org/wiki/Special_drawing_rights
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Old 04-04-2016, 12:01 PM   #30
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Nobody denies that the Feds action helped to avoid a depression but if next Financial crises happen, the Feds cannot (in his view) to expand the balance sheet to $8 or $10 trillions as it may truly collapse the dollar). The IMF with their SDR could step in and bail out whatever crises may happen.
So the Federal Reserve, backed by a $16T economy, can't expand it's balance sheet sufficiently to remedy whatever crisis we're imagining but the IMF, who gets about 15% of it's financing from the U.S., is somehow going to save the day with it's $750B lending capacity? And the currency they're going to use to bailout the collapsing US Dollar, the infamous SDR, derives 42% of its value from those very same U.S. dollars?

Call me skeptical.
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Old 04-04-2016, 03:06 PM   #31
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So the Federal Reserve, backed by a $16T economy, can't expand it's balance sheet sufficiently to remedy whatever crisis we're imagining but the IMF, who gets about 15% of it's financing from the U.S., is somehow going to save the day with it's $750B lending capacity? And the currency they're going to use to bailout the collapsing US Dollar, the infamous SDR, derives 42% of its value from those very same U.S. dollars?

Call me skeptical.
You statement is correct. However the main point here that China (2nd largest world economy which although slowing a lot lately still has much higher GDP growth rate 4.5 to 6% vs our 2 to 2.5%) started to trade with other countries in their own currencies, bypassing the dollar what reduces USD demand around the world. Then if Brazil (for example) needs a loan to import goods from S. Korea, Japan, China etc, they would go to IMF and take the SDR instead of many other needed currencies what is not even part of IMF currencies basket.
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Old 04-04-2016, 03:45 PM   #32
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You statement is correct. However the main point here that China (2nd largest world economy which although slowing a lot lately still has much higher GDP growth rate 4.5 to 6% vs our 2 to 2.5%) started to trade with other countries in their own currencies, bypassing the dollar what reduces USD demand around the world. Then if Brazil (for example) needs a loan to import goods from S. Korea, Japan, China etc, they would go to IMF and take the SDR instead of many other needed currencies what is not even part of IMF currencies basket.
If I'm reading this correctly, you're talking about two different scenarios, right?

Scenario 1) China trades directly with other countries in their own currencies

Scenario 2) Country uses SDR to finance imports

In Scenario 1, I'm not sure why we care. The U.S. supplies dollars to the world based on the demand for dollars consistent with stable domestic inflation and full-employment. If the demand for dollars falls, we supply fewer dollars. What's the big deal?

Scenario 2 also falls under the "what's the big deal category" but can get special mention for being unlikely. If Brazil needs to borrow in a currency other than it's own, it can generally do that on the global capital markets. There's no need to enlist the IMF unless a country is in crisis and can't get financing any other way. And when the IMF does lend a country money, it doesn't lend them SDRs which can't be used to buy anything. They lend in whatever currency the country needs.

P.S. the primary benefit to the U.S. from issuing the "reserve currency" is that the U.S. government gets interest free loans from everyone who's holding U.S. cash and we may also get slightly cheaper financing because of demand for U.S. securities.

So how much is issuing the global reserve currency worth? Here's what McKinsey says:

Quote:
MGI finds that the United States may not enjoy much of a privilege at all. In 2007–2008—a "normal" year for the world economy, the net financial benefit to the United States was between about $40 billion and $70 billion—or 0.3 to 0.5 percent of US GDP. In a "crisis" year—such as the year to June 2009—MGI estimates that the net financial benefit fell to between—$5 billion and $25 billion because the dollar appreciated by an additional 10 percent due its status as a "safe haven."
So, as Shakespeare might say, hand wringing about the role of the U.S. dollar reserve status is "much ado about nothing."
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Old 04-04-2016, 04:10 PM   #33
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Some people are just no fun, letting facts get in the way of truthiness. How's a fella supposed to work up some righteous indignation in the face of this?


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Old 04-06-2016, 09:02 AM   #34
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If it is in any way, shape, form or fashion related to Agora then it's questionable.
Famed promoter of financial tripe.
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It will never happen. The USD is the safest and most sound currency in the world. And it will be for the foreseeable future.
Betting against the USD is the easiest way to make a million (by starting with a billion)!
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So, as Shakespeare might say, hand wringing about the role of the U.S. dollar reserve status is "much ado about nothing."
Yup
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Some people are just no fun, letting facts get in the way of truthiness. How's a fella supposed to work up some righteous indignation in the face of this?
Came to the wrong place to stir up new followers...
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Old 04-06-2016, 04:31 PM   #35
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The Forum is a great place to discuss and/or ask for advise and guidance. Many discussions frequently have different opinions and advises. If we have majority opinion vs minority then you know what to follow. I am not a "promoter" or "the only truth" manipulator as some people here point out and fully aware of Agora Financials "influences on investments". However I did read the Currency Wars by Mr Rickards and it made sense to me. Saying that I wonder if other ever read that book or just follow a popular opinion?
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Old 04-06-2016, 04:47 PM   #36
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... Saying that I wonder if other ever read that book or just follow a popular opinion?
No, I haven't read that book, but after a while, you get a pretty good feel for what makes sense and what doesn't, and whether it is worth investing time in or not. And that doesn't mean just following popular opinion or not. Heck, 'popular opinion' says you need to hire a Financial Advisor, this stuff is far too complex to DIY. Yet, most in this forum reject that premise.

It's like all 'free energy' youtube videos and such. Sure, the laws of physics are just 'popular opinion', and this guy has the secret sauce, and you just need to keep an open mind.

I've read enough reasoned critiques in this thread alone to allow me to pass on this info without regret.

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Old 04-06-2016, 05:04 PM   #37
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Yeah.
My own opinion is that I first need to understand the incentive of the author/source of something.

A sufficiently well informed and well spoken/written person can make a reasonable argument about anything. A great example is Jonathan Swift's modest proposal where he lays out an incredibly rational argument that eating Irish babies is a great way to solve the population and starvation problems. It seems crazy today but at the time many people, even in British government didn't realize it was pure satire.

So... if someone gets some financial gain based on my action or advice they give, then I have to severely question it.

Second I need to look at the person's historical record on prediction. Currency, stock prices, economic moves, etc are notoriously difficult to predict. By notoriously difficult I mean no one in the history of economics has ever been good enough at doing it to generate massive wealth. There are a handful of extremely rich investors but they didn't get rich by predicting large scale economic trends and it's also very hard to tell luck from skill.

So against that backdrop anyone who projects a major economic trend with great confidence but profits from the actions others take rather than his own ability to predict is likely to only be correct by pure coincidence.

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Old 04-06-2016, 05:07 PM   #38
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Rickards is a lawyer, not an economist or trained financial specialist, although he did work with investment professionals in LTCM and apparently worked for many years with Wall Street businesses. His descriptions / analyses of economic conditions are plausible, but his projections and forecasts are pretty extreme and unorthodox, and the scenario he predicted in '09 has not come about, nor does it look likely.
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Old 04-06-2016, 05:30 PM   #39
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The Forum is a great place to discuss and/or ask for advise and guidance. Many discussions frequently have different opinions and advises. If we have majority opinion vs minority then you know what to follow. I am not a "promoter" or "the only truth" manipulator as some people here point out and fully aware of Agora Financials "influences on investments". However I did read the Currency Wars by Mr Rickards and it made sense to me. Saying that I wonder if other ever read that book or just follow a popular opinion?
I welcome the discussion.
However, Jim Jones had a great idea too and many folks followed his ideas, but it didn't end well for them.

So hopefully you think hard about the effects and results of "what if he is wrong" ?

I know, you are thinking, "sure BUT what if he is right?"

Well....

Anyone can think of a possible situation that "if correct" means action.
Here is one: Earth will be pulled into the Sun, so blow all your money and max out credit cards in the next week.
However, if I'm wrong you will be destitute for the rest of your life.
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Old 04-06-2016, 07:35 PM   #40
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[QUOTE=Sunset;1716354]I
So hopefully you think hard about the effects and results of "what if he is wrong" ?

I know, you are thinking, "sure BUT what if he is right?"
[QUOTE]


As I understood his recommendation, you would have 10 % or less of your assets in actual gold (not paper bonds) as a hedge against the concerns he outlines. So not catastrophic if he's wrong.

I personally have not chosen to have any precious metals in my assets. But recognize many others do as a hedge against their own concerns. So not sure how far off this guy is from many.



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