Fed up with Ben

“We don’t have to worry about a recession — we are in a depression,” says James Rickards.

“If you take the classic definition of a sustained, long-term downturn with economic growth below trend, then we are in the midst of a depression,” says the senior managing director of Tangent Capital and author of “Currency Wars.”

Rickards doesn’t see Fed Chairman Ben Bernanke as having the solution to the economic malaise gripping the county.

“Bernanke’s not a trader, so doesn’t think like a trader; he has no exit plan,” Rickards points out.

With quantitative easing, Bernanke has put on a $3 trillion trade, and while some governors on the Federal Reserve believe he should pare back the $85 billion monthly injections, no one is saying the Fed should reverse course.

“There’s a good possibility I may never see another rate hike in my lifetime,” says Rickards.

Rickards believes there’s no reason for individual investors to fight the Fed — for now. “I advise clients only to hold 10 percent of their portfolio in physical gold as a hedge against inflation.

“Businesses have no clarity into future policy, so therefore there’s no investing into hiring new workers or buying new equipment,” Rickards explains of the stagnant recovery.

Rickards points out that ObamaCare, Dodd-Frank, the implementation of the Keystone Pipeline and other regulatory policies need to be ironed out “so businesses know their future costs” before the US will see growth in the gross domestic product.

On currencies, Rickards’ book lays out what is playing out in the markets.

“Each country is degrading its currency in the hopes of spurring growth,” Rickards says. “Look at Japan. The yen has lost 40 percent of its value against the dollar in a very short period of time.”

While Wall Street currency-trading desks can exploit these moves for quick profits, Rickards warns that it’s a race to the bottom with no one winning in the long term.

“Currencies are a zero-sum game: Someone wins, someone loses,” he says. But Rickards warns that these trades run in cycles. The British sterling could be the next currency to take a pounding, later this year, with the greenback on deck for 2014.

As the yen and euro weaken against the dollar, imports and exports are directly affected. Big companies with large overseas exposure could be in for reduced revenue in such an environment.

However, Rickards is somewhat bullish on the euro, believing the member countries are doing the right thing with their belt-tightening.

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