Home > Jim Rickards: “Chaos” To Dollar Endgame “Most Likely” (UUP, UDN, GLD, SLV, EUO, FXE)
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Jim Rickards: “Chaos” To Dollar Endgame “Most Likely” (UUP, UDN, GLD, SLV, EUO, FXE)

February 7th, 2012

Dominique de Kevelioc de Bailleul: Currency Wars author and adviser to the U.S. Department of Defense, Jim Rickards, said the most likely endgame to the currency war between the U.S. dollar, euro and Chinese renminbi is “chaos” for the U.S. dollar. [Related: Powershares Dollar Bullish ETF (NYSEArca:UUP), Powershares Bearish ETF (NYSEArca:UDN)]   Get my next ALERT 100% FREE

“I lay out four scenarios [in my book], which I call ‘The Four Horsemen of the Dollar Apocalypse’,” Rickards told Euro Pacific Capital CEO Peter Schiff (posted Feb. 7, 2012 on goldseek.com).  “The first case is a world of multiple reserve currencies with the dollar being just one among several. . . The second case is world money in the form of Special Drawing Rights (SDRs). . . The third case is a return to the gold standard. [Related: CurrencyShares Euro Trust (NYSEArca:FXE), ProShares UltraShort Euro (NYSEArca:EUO)]

“My final case is chaos and a resort to emergency economic powers. I consider this the most likely because of a combination of denial, delay, and wishful thinking on the part of the monetary elites.”

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In the case of the U.S. returning to a gold standard, tomorrow, Rickards believes a gold price of $7,000 would adequately back the dollar from hyper-inflating.  But as time moves on along with expanding Fed balance sheets, that price tag climb, which, according to his previous analysis falls in a “range of between $5,000 to $11,000 per ounce of gold.”  See Jan. 6, 2012 KWN interview.

However, Rickards doesn’t expect the Fed to go quietly into the night.  “An honest debate about a gold standard is the last thing Bernanke wants.” Rickards said in the Jan. 6 KWN interview.

Instead, the Fed intends to fight for its survival until either the markets discipline the Bernanke Fed—as was the case of the bond vigilantes smack down of Paul Volker in 1980—or when Congress moves to limit Federal Reserve powers.

As to the former, Bernanke cannot respond by aggressively raising short-term interest rates without turning trillion dollar U.S. budget deficits into two trillion dollar deficits (without draconian budget cuts), which most assuredly would lead to a Greece-like run on the dollar.  To the latter, the litmus test of a Reagan-like Revolution remains lukewarm among Republicans toward the presidential candidacy of Congressman Ron Paul, the man whose track record for fighting the entrenched Keynesian mindset in Washington is legendary.

In addition to reining in a profligate Fed, the Congress and president must undertake politically unsavory measures to reign in its profligacy and coziness with banks, as well, which, according to Rickards include:

  • Breaking up banks
  • Banning derivatives
  • Raising interest rates
  • Cutting government spending
  • Eliminating capital gains and corporate income taxes
  • Institute a flat tax
  • Reduce regulation to job creation

Those steeped in not only economics, but also U.S. politics, are keenly aware that any one of these issues creates a political firestorm for both parties, not to mention powerful forces behind the banking cartel of the U.S who would seek to torpedo any legislator it deems a threat to its 100-year-old money printing factory.  Assuredly, the blackballing of Congressman Paul hasn’t gone unnoticed by Washington politicians.

Could even ‘Rough and Ready’ Teddy Roosevelt undo the madness of the banking cartel’s grip on Washington?

Today, anyway, Rickards sees no tough man on a horse lighting a fire under the body politic like a Teddy Roosevelt once did in 1900; he thinks, instead, the course to a dollar devaluation is inevitable.  There’s too much reform and too little time to alter the course of the U.S. dollar’s debasement.

In fact, Rickards anticipates that the euro will end up much better off than the U.S. dollar.  That’s quite a statement.

At least, in Europe, there’s a shred of infighting about spending cuts, according to Rickards.  In contrast, in the U.S., not a peep about tackling entitlements and an overhaul of the tax system, from either party.  Simpson-Bowles has so far been all but completely rejected by an experimental Super Committee.

“I expect Europe and the euro will emerge the strongest after this currency war by doing the most to maintain the value of its currency while focusing on economic fundamentals, rather than quick fixes through devaluation,” Rickards explained.  “This is because the U.S. and China are both currency manipulators out to reduce the value of their currencies. In the zero-sum world of currency wars, if the dollar and yuan are both down or flat, the euro must be going up. This is why the euro has not acted in accord with market expectations of its collapse.

“The other reason the euro is strong and getting stronger is because it is backed by 10,000 tons of gold – even more than the U.S. This is a source of strength for the euro.”

Rickards recommends investors hold 20 percent of their assets in gold bullion, with another five percent held in silver.  He anticipates the currency war (to see who can debase the most) between the dollar, euro and renminbi to last an additional five years, at least. [Related: SPDR Gold Trust (NYSEArca:GLD), iShares Silver Trust (NYSEArca:SLV)]

By Dominique de Kevelioc de Bailleul From Beacon Equity Research

BeaconEquity.com is committed to producing the highest-quality insight and analysis of small-cap  stocks, emerging technology stocks, hot penny stocks and helping investors make informed decisions. Our focus is primarily OTC stocks in the stock  market today, which have traditionally been shunned by Wall Street.  We have particular expertise with renewable energy stocks, biotech stocks, oil stocks, green energy stocks and internet stocks. There are many hot penny stock  opportunities present in the OTC market everyday and we seek to exploit these hot stock gains for our members before the average daytrader is aware of them.


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  1. Stephan Larose
    February 11th, 2012 at 03:01 | #1

    Though some of the measures mentioned such as breaking up banks and banning derivatives are sound, the idea of cutting corporate and capital gains taxes can be discounted outright. Such measures are tantamount to a huge wealth transfer from the 99% to the 1%, and will not lead to growth or the restoration of democracy. History shows, time and again, that when a small group gains too much economic power, they subject the rest to serfdom or worse. The key to democracy and wealth is a fairer distribution of wealth. Workers should own parts of the company they work for, give them a stake. Income taxes should be eliminated and replaced with progressive sales and ecological taxes that reflect the luxury and carbon intensity of goods, this would allow for the middle class to live a nearly tax free life and free up resources for them to invest, save, and consume.

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