Obama to China: Behave like 'grown up' economy

>>> the military protecting us from enemies that attack us with weapons. but could our greatest vulnerability right now actually be our financial system and our currency? federal reserve chairman ben bernanke and presidents barack obama and george w. bush used bailouts and money printing to save us from another great depression, or so they tell us. but our next guests argue those very actions are the first steps in a global crisis and currency war. sounds right up our alley. james richters is the author of the provocative new book,

"currency wars: the making of the next global crisis ." also with us, john brown , former british parliament member and current senior market strategist for euro pacific capital. i welcome you both to the conversation. in brief --

>> hello, dylan.

>> hello, sir. and i'll start in the studio with you, james . here, the history of corrupt governments manufacturing a currency in order to preserve their own power dates back to niro in rome, if not before. there's nothing new about this.

>> that's exactly right. during the roman empire , they had a silver coin , which had a good store of value, but when they were running budget deficits in the roman empire , they would change the composition and put in lead or other base elements --

>> which was their money devaluing.

>> it's also true some of the strongest, greatest, longest-lasting empires had solid money. the republican of venice had periods of 300 years of price stability , because they used gold.

>> because they had capital requirements .

>> correct. well, in fact --

>> gold was the capital requirement .

>> right. banks were required to have it.

>> so this is all well and interesting, john, from a perspective of a financial market player or a politician of some kind, perhaps, but if i am an average american , an average western european , an average japanese or chinese citizen , brazilians, i don't care what, what is the actual risk to the fabric of society, whether it was in rome when they were printing money or in brussels and washington, d.c., where they're doing it today?

>> well, first, i totally agree with james . and what we're witnessing is a currency crisis that is being camouflaged by politicians as a debt default problem. and it is being created not by wall street , but by central bankers, led in particular by the fed under greenspan and bernanke. so now the u.s. dollar is actually at the epicenter, although shielded for the moment, by the euro. and we're watching a threat to the whole paper money system. and that would create a mammoth depression and abject poverty for everybody. so everybody's got to be really worried about it.

>> what can you do about it?

>> and you saw yesterday -- well, the first thing is you, i think, you have to start cutting government waste, rather than spending, and you have to get down to restoring faith in money, in paper money . there has to be a return to some form of gold link. even if it's just for central banks , as it was until 1971 , from 1944 to '71. that was only the central banks . the next stage would be to get back to a full gold standard that we had before, which was where sterling and dollars were convertible into gold by individuals. and that is a true, honest money system. i don't mind what the price is, of course, people argue, there's not enough gold. but it depends what price. if you took the conversion price at $10,000 an ounce, then there might well be enough gold without causing a recessionary influence. but in the meantime, people are angry, very angry, and i can sympathize with a lot of these people on occupy wall street . but they've got the wrong target. they're going for wall street , which were like someone's opened the candy store , broken the door open, and they're finding all the children who eat the sweets rather than the criminal who broke the door open. which was the central bank . in particular, the fed. and now we've got france and germany talking about cut and run. oh, we'll have a two-tiered euro system. that means they're going to leave the pig countries to flounder on their own and all their lenders to flounder and all their credit default swap insurer to flounder? i mean, it's a design of disaster.

>> i want to get james back in for just one second, john. i'm sorry. if you were to look, james , at the risk scenario, it's one of those risks that if you are debasing your currency, as we know for a fact america is, as we know for a mathematical fact, the eurozone is, as we know the chinese are, for that matter. i mean, this is a political tool that wealthy nations are using against one another, it's why it's called a currency war. that's why it's a war. but if you were to look at the liability of that, which is seen in the italian lira , for instance, where it's all of a sudden $10,000 for a cup of coffee, right? what is the end game for the average american of a currency war?

>> right. there are a lot of costs, but the greatest cost is the loss of trust. the dollars is a contract between the government and the people. and if you're the government -- if i can't trust you to maintain the currency, how can i trust you with anything else? i think you'll begin to see other institutions flounder, because they've lost trust in the most basic compact, which is the dollar itself. hyperinflation is a possibility, but deflation is another possibility. the fed is supposed to maintain price stability . i've written and spoken a lot about the gold standard . i think we'll probably get there through chaos. i actually favor king dollar. i would like to see a strong dollar. i would like to see the fed raise interest rates. make the u.s. a magnet. reward savers instead of spenders. make the u.s. a magnet. make the u.s. dollar the go-to place when you want to put your money to work. entrepreneurship, innovation, strong dollar. that's what i would favor. and it's not just an economic threat, it's a threat to national security . how will we have a president in the world project force abroad if we have a weak currency? there's a lot to pay for. and the pentagon's worried about it.

>> john, i'll send a note to anybody i can found down at the occupation to occupy the federal reserve and to occupy brussels!

>> well, very interesting, dylan, you say that. did you notice that bernanke is now flirting with the military? does he fear demonstrations against the fed, which will be far more understandable than those on wall street .

>> and again, information is widely available and a lot of the folks involved in this are very well informed already, and more importantly, i think, are very anxious to become better informed. a pleasure to have the conversation, guys. john brown , rickards, congratulations on the book, and john, hope to talk to you soon.

Source: http://www.msnbc.msn.com/id/45283979/ns/politics-white_house/

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