In this CNBC interview, Jim Rickards, Senior Managing Director for Market Intelligence at Omnis, lays out a clear analysis of the future of the dollar. He focusses on the implications of Federal Reserve Governor Kevin Warch’s Wall Street Journal OpEd “The Fed’s Job Is Only Half Over” issued while the G-20 was meeting.
Rickards pays particular note to this excerpt from Warsh’s op ed, suggesting it is all about the value of the dollar relative to gold:
Today, even more than usual, we should maintain considerable humility about optimal policy. Financial market developments bear especially careful watching. They may impart more forward-looking signs of growth and inflation prospects than arithmetic readings of stimulus-induced gross domestic product or lagged composite readings of inflation. For example, the level of asset prices and associated risk premiums, and gauging their trend and durability, will demand careful assessment.
Rickards suggests that Warsh is signaling to the G-20 that the Fed will try to fight the impending collapse of the US dollar and instead will try to manage a steady planned decline of our nations currency, wealth and influence in the world as a means to inflate away an otherwise impossible to manage level of federal debt.
The implications of Rickards interview, regarding both the Fed’s objectives and their limited powers to reach them is both clear and eye opening.
Rickards analysis seems spot on. And my sense is that Warsh is being extremely optimistic in suggesting that the Fed’s job is half over. Despite the apparent easing of the crisis, the financial mess our nation is in has only begun to become clear. Very few in Washington or in the chattering class have been as forthright and clear as Rickards regarding the implications of the inevitably declining dollar on our nation’s future or that of its citizens.