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Mr Rickards, author of Currency Wars and MD of Tangent Capital, was the keynote speaker at the Sanlam Africa Cup of Investment in Cape Town this week. He expects gold to rocket as high as $7,000/oz in the next five years as the dollar-based global economy collapses and is replaced by a more viable, gold-based currency.
“Gold is not an investment, it is not a commodity. Essentially, gold is money,” said Mr Rickards.
While this sounds like great news for South African gold miners, Mr Rickards said the country would not benefit unless the South African Reserve Bank increased its gold reserves.
A lawyer by training, Mr Rickards was involved in the sequestration of Long Term Capital Management, an asset manager that collapsed in the late 1990s and shook people’s belief in the market.
“The dollar-based global financial system is unstable. I see it collapsing in the next three to five years.
“It will either be replaced by a new gold standard, or a new currency like the special drawing rights of the International Monetary Fund or a combination of the two.
“The US Federal Reserve takes confidence in the dollar for granted, and we know something as fragile as confidence can vanish very rapidly.”
Mr Rickards said the war drums beating over Syria would hasten the dollar’s fall. The implications for South Africa are tremendous — not only is it a large gold producer, but it also has one of the largest gold reserves in the world.
With the gold price moving in the opposite direction to the dollar, any sudden and steep fall in the value of the dollar would inevitably lead to an increase in the gold dollar price.
According to Mr Rickards, this is not as unthinkable as it seems. The world came to the brink of a similar collapse in 1978. From 1977 to 1981, the value of the dollar was halved.
In 2010, the US embarked on a policy of cheapening the dollar. That has had ripple effects on the world ever since.
According to Mr Rickards, September 18 will be a crucial date in the history of the world, as that is when the US Federal Reserve will announce whether it will stop printing its currency faster than the Zimbabwe Reserve Bank did at the height of the hyper-inflation era.
Although the markets seem to have priced in a slowdown in the rate of money printing by the Fed on this date, Mr Rickards said he was sceptical it would actually happen.
As far as he was concerned, the “imminent” military strike in Syria by the US and its allies would make the US central bank reluctant to start tightening money supply.
“If you look at Fed policy during the Second World War and the Vietnam War, it was very accommodating. I’d be surprised if the Fed started tightening during a shooting war with Syria,” he said.
Originally posted by Xcouncil=wisdom
And on those lines....when in History has war hurt the US Dollar?
Quite the opposite in fact.
Very interesting post St Udio!