They just don't understand currency . . . ever.
Thank you to Martin Armstrong @ Armstrong Economics.
9:15 “Oh, the dollar is going
to crash, and gold is going to go up.” That
does not happen.
The U.S. is the reserve
currency of the world. We will be the
last to fall, not the first. And what
makes things really worse for the world is the dollar going up, not down, because
you have all of these emerging markets that issue debt in dollars, so you have
Sri Lanka falling, Lebanon falling. In China,
you’ve got all kinds of riots. Even three
years ago, Beijing was warning the provinces and banks, “Do not borrow in
dollars. But they were borrowing in
dollars because, oh, geez, it was a cheaper interest rate. And they had no concept of foreign exchange
risk. I saw that in the 1980s when I got
called in to solve such a crisis that was in Australia.
10:25 You have a low-glow interest rate but now you
need twice as many dollars to pay back.
10:35 That's what happened in Australia. The bankers were selling Swiss mortgages. "Oh, you'll save interest." But then the currency swings and suddenly you owe 20% more. The same thing happened in Europe when the Swiss franc and the euro peg broke in 2015. They again had sold all of these Swiss mortgages to save money on interest. So you've had the same thing. You've had all of these emerging markets, and people in China doing things in dollars because the interest rate was virtually zero, 0%. Oh, gee, look at how much we're saving, and now the dollar is going up and you're seeing bank runs and this is what we're talking about here. Actually, really the first financial crisis I was called into was in 1973. It was Franklin National Bank that failed, and it failed basically on a 7% move of the Italian lira. They were funded basically from Italy, and that brought down Franklin National Bank. Ever since then just about every financial crisis and currency crisis I've been called into. Oh, get the guy that did that one. They just don't understand currency . . . ever.
12:08 In 2008, when Anheuser Busch got bought by InBev, the euro was $1.60 to the U.S. dollar. Wow, what a deal. Now, you fast-forward two or three years, or however many years that was, uh, 14 years, now the euro is par with the dollar. And you're saying that anybody holding dollar debt in Euro is going to get creamed with this exchange rate because now they've got to pay back even more dollars, right?
12:40 This is one of the major financial problems that's been going on since the 1970s. They still do not teach foreign exchange risk in universities. It's mind-boggling. When I got called in in 1985, when they were forming the G-5, I wrote a letter to Reagan, telling him that he was going to create a crash in 2 years. "Oh, yeah, you shouldn't go out of committee, . . . " You just sold a 1/3 of the national debt to Japan and then you stand up and say that you want the dollar down 40%? Don't you think they're going to sell? And they just scratch their head and they say, "Well, why?"
13:35 Gas deal. Currency moves can be much worse than interest rate moves.
13:48 Oh, yeah, currencies can move 20% to 30% in one to two years. The British pound was like $2.40 in 1980, and it went to par at $1.03 in 1985.
14:12 What about Deutsche bank? What about Commerce Bank? What about Credit Swisse's credit default swaps? What about Germans and the gas that is cut way back and the economy tanking. What about these banks? Don't they have to have a good economy to stay afloat?
14:29 Absolutely.
14:30 Could we have a crash in Deutsche Bank? Because it was the most systemically dangerous bank, according to the IMF, and nothing's changed. Isn't Deutsche Bank the most systemically dangerous bank still in the world? It could take down at least Europe?
14:50 All of these things are very real crises. I can tell you that in speaking with the top three banks in New York City, they refuse to accept any European sovereign debt as collateral. Period. That is what started the whole RePo Crisis in 2019. The real story was they were not willing to accept any sort of collateral on Europe from the European banks on an overnight basis. You had Merkel coming out and saying "Oh, well we're not going to bail out Deutsche Bank," and she had to say because she refused to allow Greek banks to be bailed out. Now you're on the opposite side of the table. Why would you deal with Deutsche Bank if she just said "if they went belly up, sorry, we're not bailing them out." So that's why the Fed had to step and start becoming the market maker in the RePo markets because banks are not willing, in the United States, to accept any European sovereign debt. Period.
16:06 Do you think this is what Socrates is picking up in the August-September time frame--that there's going to be a debt crisis?
16:15 This is, I think, honestly why they're pushing for war. This is Schwab's idea, and I've been on the opposite side of the table from him. Even in our Rome conference, March 2019, Nigel Farage came to be our guest speaker, and he said
