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Market Forces
Featuring Jim Rickards
Demetri Kofinas speaks with financial analyst and best-selling author Jim Rickards about the IMF and World Bank meetings taking place in D.C., the prospects of war with North Korea, and the future of US-China relations. Jim also shares his thoughts about the changes he expects to see at the Fed as Janet Yellen's term comes to an end.

In this Market Forces segment of Hidden Forces, host Demetri Kofinas speaks with Jim Rickards about a timeline for war with North Korea, de-dollarization, and changes at the Trump Fed. Rickards is the author of multiple New York Times bestsellers including The Death of Money, Currency Wars, and The New Case For Gold. His latest book is The Road To Ruin: The Global Elites' Secret Plan for the Next Financial Crisis. Editor of the Strategic Intelligence newsletter, Jim Rickards is also a member of the advisory board of the Center for Financial Economics at Johns Hopkins. He’s an adviser to the Department of Defense and the U.S. intelligence community on international economics and financial threats and served as a facilitator of the first-ever financial war games conducted by the Pentagon.

 

Jim Rickards believes that the United States may be six to eight months away from a shooting war with North Korea. A conflict on the Korean peninsula may be far more complex and unstable than the public realizes. A recent article by Evan Osnos in the New Yorker Magazine paints a daunting picture of the state of affairs between the Trump administration and the government of Kim Jong-un, characterized by a deep mistrust and hampered by a lack of communication.

 

Still, hopes remain high that the Chinese Communist Party, with its 19th National Congress coming up in less than one week, may be able to apply sufficient leverage in order to stem the crisis. Much was made of this in Mark Bowden’s piece for The Atlantic. Yet, Osnos and others believe that Chinese influence is drastically overstated, while the potential for missteps remain abundant. In a recent news conference at the Pentagon, Secretary of Defense General James Mattis stated that the US has military options to exercise against North Korea that could be “minimally impactful on Seoul.” The implication that some members of the press have drawn, including our guest Jim Rickards, is that the US military may have a “secret weapon,” at its disposal. Unfortunately, the press has a long history of overestimating the efficacy of untested, military technologies. The Reagan administration’s Strategic Defense Initiative comes foremost to mind. Indeed, according to Philip E. Coylse III, who once ran the Pentagon’s weapons-testing program, our anti-ballistic missile defense system “is something the U.S. military, and the American people, cannot depend upon.”

 

Despite this uncertainty, financial markets continue to make new highs. The Nasdaq is up 21% year-to-date and the S&P 500 is up a respectable 13% over the same period, begging the question, “why are financial markets so bad at pricing geopolitical risk?” Demetri believes that such risk pricing is a skill that investors have become particularly incompetent at after decades of geopolitical, round upon round of quantitative easing, nine years of record low federal funds rates, and a growth in passive investment strategies and indexing that have laid the foundations for a violent reversal in equity prices. How will markets react if tensions escalate on the Korean Peninsula? What might the catalyst be for a war with North Korea, and will investors even wait to find out?

 

The truth is that investors have more to worry about than just war with North Korea. The spectrum of de-dollarization continues to create problems for American diplomats and strategists as well, in their efforts to use sanctions over military force. Recently, the Chinese announced the creation of a Yuan-based oil contract that would be convertible into gold. Does Jim Rickards see this as just another sign that countries like China, Russia, and Iran may be closer to the de-dollarization of the global financial system than people realize? And what about Saudi Arabia? Considering the challenges the US-Saudi relationship has faced in recent years, may they also be on the verge of pulling out of the petrodollar?

 

In closing, Jim and Demetri discuss Janet Yellen, Kevin Warsh, and some of the changes that may happen with the Trump Fed. Rickards had previously made the point that Donald Trump has the power to re-shape the Federal Reserve Board in ways we haven’t seen since the days of Woodrow Wilson. The President has control over six of the seven spots on the Fed Board of Governors. Three spots on the Trump Fed are currently empty. Two are occupied by conservatives, including the recently appointed Randal Quarles. As for Janet Yellen, her status at the Trump Fed remains unclear as her term comes up for renewal in January.

 

So, not only is a Trump Fed likely to be populated by Republicans, but it may be led by one as well. Kevin Warsh, a notable skeptic of the data-dependent approach of Janet Yellen, as well as her predecessors Ben Bernanke and Alan Greenspan, may be Trump’s top choice to head the Fed after Yellen’s term runs out in January.

 

Producer & Host: Demetri Kofinas

Editor & Engineer: Stylianos Nicolaou

Join the conversation at @hiddenforcespod

 

James Rickards is the Editor of Strategic Intelligence, a financial newsletter, and Director of The James Rickards Project, an inquiry into the complex dynamics of geopolitics + global capital. He is the author of three New York Times best sellers, The Road To Ruin (2016), The Death of Money (2014), and Currency Wars (2011), and the national best seller, The New Case for Gold (2016), all from Penguin Random House.

 

He is an investment advisor, lawyer, and economist, and has held senior positions at Citibank, Long-Term Capital Management, and Caxton Associates. In 1998, he was the principal negotiator of the rescue of LTCM sponsored by the Federal Reserve. His clients include institutional investors and government directorates. He is an Op-Ed contributor to the Financial Times, Evening Standard, The Telegraph New York Times, and Washington Post, and has been interviewed on BBC, CNN, NPR, C-SPAN, CNBC, Bloomberg, Fox, and The Wall Street Journal. Mr. Rickards is a guest lecturer in globalization and finance at The Johns Hopkins University, Georgetown University, The Kellogg School at Northwestern, and the School of Advanced International Studies. He has delivered papers on risk at Singularity University, the Applied Physics Laboratory, and the Los Alamos National Laboratory. He is an advisor on capital markets to the U.S. intelligence community, and the Office of the Secretary of Defense, and is on the Advisory Board of the Center on Sanctions & Illicit Finance in Washington DC. Mr. Rickards holds an LL.M. (Taxation) from the NYU School of Law; a J.D. from the University of Pennsylvania Law School; an M.A. in international economics from SAIS, and a B.A. (with honors) from Johns Hopkins. He lives in New Hampshire.

 

@JamesGRickards

 

James Ricards on the web:

The James Ricards Project

James Ricards Youtube

James on Speakerhub


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