The Financial Crisis Nobody Learned From

by Michael Covel
Daily Reckoning

Covel: I’m delighted to have Jim Rickards with me today. Jim’s probably the world’s leading expert on currency wars and one of the world’s top financial analysts. Welcome to the show, Jim. Let’s trace how you got to this point, Jim. You were at the center of the Long Term Capital Management crisis that grew out of Thailand in 1997–98. Can you talk about that?

Rickards: Thanks for having me, Michael. Starting in May 1997, the Bank of Thailand devalued the currency, the Thai baht. Previously, they’d been maintaining a peg to the U.S. dollar, but the interest rates and returns offered more than the dollar, so it was the classic carry trade. U.S. investors could borrow in dollars at a lower rate, convert them to Thai bahts, and buy assets in Thailand. These included golf courses, resorts, stocks, bonds. They offered very high returns.

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