By Dominique de Kevelioc de Bailleul
Speaking with Russia Today Wednesday, best-selling author of Currency Wars Jim Rickards said Fed Chairman Ben Bernanke is drawing up a blueprint for more ‘QE’, and he expects the gold price to jump three to five times within three to five years as a result of the currency war heating up between the U.S., Europe and China.
However, in addition to his forecast for gold, Rickards also laid out Bernanke’s plan for the timing of the next round of ‘stimulus’ and the signs to watch for—and in a desperate last-ditch effort to yank scared money out of hiding, the Fed has the legal authority to buy equities, which is all good for the gold price, according to Rickards.
“I kinda expect something [QE] in August, September. But whether it’s then or after the election in January, you can see it coming,” Rickards told RT’s Lauren Lyster.
Rickards continued to state that the Fed’s tacit mission—implied from the FOMC’s ‘Operation Twist II’ announcement, Wednesday—is to incentivize investor cash to leave low-yielding interest-bearing accounts and to enter the stock market in the hopes of reigniting economic activity and speculation since lost in part due to the Flash Crash of May 6, 2010.
“The Fed wants them [broker dealers] to buy stocks, wants them to buy mortgages; it’s just more market manipulation,” he explained. “It’s forcing investors to buy other riskier assets, and that will pump up asset prices such as stocks and housing. . . It’s all about getting asset prices up.”
Rickards’ thesis for his expectation of a Fed QE announcement out of the July/August 31-1 or September 12-13 meeting is predicated on the probability of an European Central Bank policy move of lowering overnight interest rates by 25 basis points on July 5. As Italy and Spain bond yields blow out to near-capitulation levels of six and seven percent, respectively, the ECB needs a “bazooka” to lower rates again to keep the Ponzi scheme of debt from collapsing.
“I still expect that, probably a 25-basis-point rate cut,” Rickards speculated. “By the way, that ECB rate cut that’s coming, that I see coming, is one of the reasons the Fed could hold off. . . The Fed says, you know, we can hold off on QE3 to August, September because the ECB is going to pick up part of the slack in the meantime. . . I do expect the ECB rates to come first.”
Rickards continued by laying out the sequence of events he sees coming out of both the tag-team efforts of the Fed and ECB, reminding viewers of RT that, through the Fed’s own admission, Bernanke and ECB President Mario Draghi talk privately about coordinating monetary policy between the two premiere central bank reserve currencies.
The ECB “didn’t want to ease ahead of the Greek election, because that makes it too easy on the Greeks,” proffered Rickards. “Keep the pressure on. Get the Greeks to do the right thing, which they did. Then you get your rate cuts and you get your QE3. That’s the sequence.”
And regarding the question of a globally coordinated interest rate cutting ‘shock and awe’ move to arrest an impending collapse, Rickards dodged the question somewhat, but said it has happened before with the wildly rising Japanese yen which followed the Fukashima tragedy. A coordinated move between the G-8 outside of targeting one currency, as in the case of the yen last year, would be unprecedented.
Despite the drama in Europe, Rickards is bullish on the euro and expects that, not only will Greece and the other beleaguered PIIGS remain in the euro, but he “expects members to be added over time” and anticipates the next move in exchange rate between the euro and the dollar will be back up to 1.35.
Rickards also said to watch for the June 28, 29 European Summit. “That’s when we’ll see some very big announcements, and I think positive ones,” he said.
And for the gold price, “My long-run thesis on gold hasn’t changed,” Rickards said. “I do see it in the $5,000-$7,000 range over a kinda three-to-five-year period as confidence in paper money begins to collapse. But that’s not something that happens overnight. The world governments and IMF will print a lot of money before that happens.”