DEC 16, 2014
Dec. 16 (Bloomberg) -- On today’s “The Roundup,” James Rickards, author of “Currency Wars,” Bloomberg's Trish Regan, Lisa Abramowicz and Douglas Lavanture o Street Smarts.
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Those with longer memories are starting to emerge in emerging markets now and in 1988. that is when they started isolating some contagion spreading to russia and brazil.
Today's potential warning signs, russia's surprised interest-rate increase on the ruble, making likely the event of a default.
All of this and the fed has not even begun raising interest rates.
Should local investors be bracing for more pain?
I cannot think of a better story to have you on, jim, because you were at long-term capital back in those scary days when there was a lot of concern about russia and the emerging markets in general.
I did negotiate that battle on behalf of long-term capital.
That was one that ended up in russia, and there was some misunderstanding about that.
We lost about 100 lane dollars in russia, but we lost -- $100 million in russia, but we lost about $4 billion in global trade because that did not work out.
There was actually blood in the streets of seoul and jakarta.
Brazil is where the IMF built the firewall.
This actually started in russia, but a lot of it did not end up there.
Your fear of contagion, how does that move forward?
There was a large amount of dollar debt in russia.
Russia has certain amount of gold reserves.
It's enough to cover the sovereign debt, but not the corporate debt.
How would you cover those corporate debts?
They can earn $10, that's one thing.
We are putting sanctions on them, so that his heart.
Who owns the russian debt?
European banks and investors.
The answer is, it will come back here.
The people who will you money, you said a have the problem, but actually you are the one with the problem because you will bonds.
And it's not just russia.
You have investors with other assets that are tired -- tied to oil prices.
Particularly energy junk bonds in the u.s., and venezuela debt.
It is turkey, venezuela, brazil, mexico.
The biggest story is the strong dollar.
When i see oil and gold and the ruble going down, i don't think they are going down.
I think the dollar is going up.
Here's the problem.
The fed wants inflation.
They said they want to percent inflation.
Some are saying 3%. but a strong dollar, if you raise interest rate, you make a stronger -- the dollar even soccer and that makes inflation worse.
-- you make the dollar even stronger and that makes inflation worse.
You don't think the fed is going to tighten, and you do think druggie is going to ease?
-- mario draghi is going to ease?
No, not much.
No real cheery?
But not really in 2015. the end of qe2 in june, 2011, and they started qe3 in september, 2012. there was a 15 month gap.
The fed does not turn on a dime.
They go 50 months from where we are right now, the first quarter of 2016, that is when we may see it.
You are saying we may get another round of quantitative easing in the united states in 2016. if the fed raises rates, which i don't expect, it will strengthen the dollar and increase deflation.
But the fred said -- the fed says they want inflation.
Be my guest, raise rates.
A we will have a severe recession and a strong dollar and more deflation stop that of which the fed wants.
-- and more deflation, none of which the fed wants.
But what if it keeps going up?
China is selling down, japan is falling.
This is just another asset bubble created by the fed.
I actually think you are onto something about them not hiking rates.
I don't see the advantage of this point.
But to do another round of qe , that reinflate the potential bubble everyone has been talking about.
I don't see why, given all of the concerns about the perverse incentives that the fed is given to investors and corporate borrowers.
You are right, but the alternative is deflating bubble, and no politician wants that.
It will eventually crash on its own, but they will keep it going as long as they can.
Meanwhile, you have china and russia trying to stockpile gold trying to get out from under the dollar.
This is a major potential collapse of the international monetary system.
Not tomorrow, but a year-and-a-half from now.
But this is such an unbelievable story.
The massive hack sony's computers has spawned a lawsuit by the company, as they claim it is failing to protect the information of company workers.
You could certainly make the artemis that they did not do a good job of protecting the information.
-- you could make the argument that they did not do a good job of protecting the information.
This hack is said to be coming from a north korean group that wants to see this movie, the interview not released in theaters.
There are so many enemies both of could potentially be a pylon test just to give them -- just to give some fear to the american public.
It's a public relations battle.
They want to make us feel us uneasy as possible, whoever they are.
And you could also blame sony.
This is not the first time something like this has happened.
The playstation level was hacked and information was stolen.
This is a company that seems to be in at at handling hacker situations like this and dealing with them in an appropriate manner.
The cost is upwards of $250 million.
You would expect it to happen at a financial services company.
You even expected at retail companies, but you don't necessarily expect it at an statement company.
It is a wake-up for corporate america in general.
For corporations across the globe, because it shows them that everybody is honorable to this.
-- everybody is vulnerable to this.
You made a good point, because this is an attack on the u.s. it is not -- it has switched from an attack on the financial system to the way we express ourselves.
We live in a world of cyber threats and terrorists threats.
Here is all three coming together, cyber, terror, and financial, all in this one event.
And it's one of the biggest exports, so another way to hurt the u.s. economy.
's $.10 will be disturbing sony music and songs.
-- t encent will be distributing sony music and songs.
It is going to double in the next few years.
And it seems 10 sent -- t encent is ahead of its rivals just by thinking this deal.
-- inking this deal.
It's going to be a huge market over in china.
As sony also learned the hard way with consumers in the market, legally or illegally.
In china, it's like my kenny G -- it's like kenny g, right?
He has passed away, but john denver went over there in early 1990's after tiananmen square