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00:00STRONGER DOLLAR OVER THE LAST FEW WEEKS. WHAT DIFFERENT TODAY? >> IT'S JUST A CONTINUATION OF THE TREND. YOU HAVE TO GO BACK TO DECEMBER 2013 WHEN BEN BERNANKE START THE TAPER. REMEMBER THAT YELLEN DID NOT START THE TAPER. FIRST, TAPER THE ASSET ARTISTS, THEN RAISE INTEREST RATES AND THEN REDUCE THE BALANCE SHEET. IT WAS ALL BASED ON THIS IDEA THAT THE U.S. ECONOMY WAS GETTING STRONGER AND COULD BEAR THE STRONGER DOLLAR, BUT THE FED DATA IS COMING IN WEEK, BUT THE STRONG DOLLAR IS DEFLATIONARY, SO YOU HAVE THIS CONUNDRUM. THE FED WANTS INFLATION, THEY SAY THEY WANT TO RAISE RATES, BUT RAISING RATES MAKES THE DOLLAR STRONGER, WHICH IS DEFLATIONARY. SO THEY ARE MOVING AWAY AND NONE OF IT MAKES SENSE. IF THEY RAISE RATES, LOOK OUT BELOW -- YOU WILL SEE EMERGING MARKETS CRASH, PROBABLY WORSE THAN 1997. IF THEY DON'T RAISE RATES, THE MARKETS COULD RALLY BECAUSE THAT IS THE EQUIVALENT OF A RATE CUT. ALIX: YOU MAKE AN EXCELLENT POINT AND I HAVE A CHART TO BRING UP TO TALK TO THAT POINT. WE'RE LOOKING AT THE DOLLAR INDEX AND 10 YEAR TREASURY PRICE. WE HAVE SEEN A DIVERSIONS OVER THE LAST FEW WEEKS, BUT ALL OF THE SUDDEN, WE SEE THEM RALLY TOGETHER. MY ASSUMPTION IS EASIER HUGE INFLOW INTO THE DOLLAR AS WELL AS TREASURIES. WHERE IS THAT COMING FROM AND WHAT EMERGING-MARKET MIGHT FEEL THE MOST PAIN? >> IT IS REALLY COMING FROM ALL OVER THE WORLD, EXCEPT FOR CHINA. A MASSIVE CAPITAL FLOW COMING FROM ALL OVER THE WORLD, BUT THE WAY TO MAKE SENSE OUT OF IT, THIS IS A GIANT DEFLATIONARY TRADE. IF EUROPE IS CUTTING RATES AND CHINA IS EASING, THEN GLOBAL CAPITAL WANTS TO BE IN THE U.S. DOLLAR BECAUSE YOU'LL GET A HIGHER RETURN. DEFLATIONARY IN THE BOND MARKET, NOT ONLY ARE YIELD CHASING DEFLATION DOWN, SO YOU GET A MASSIVE BOND MARKET RALLY WHICH I EXPECT TO CONTINUE, EVERYONE ELSE IS LOWER THAN THAT, SO THIS ON THE MARKET RALLY COULD CONTINUE. STOCKS ARE SAYING YOU ARE CRAZY TO RAISE RATES IN THIS WEEK ENVIRONMENT, SO THE QUESTION IS WHEN IS THE FED GOING TO WAKE UP ? THE MODELS IS -- THE MODELS ARE WRONG BUT THEY ARE DATA DEPENDENT. MY GUESS IS BY JUNE, THEY WILL REALIZE HOW WEAK THE ECONOMY IS AND THEY WILL BLINK AND RAISE RATES. BUT THE MARKETS COULD RALLY. IF THEY EXPECT HIM -- EXPECTED INCREASE BUT DON'T, IT'S LIKE A RALLY. BUT IF THEY GO TO EVEN QE4, THEY COULD RALLY. YOU DON'T WANT TO SHORT SELL BUT YOU DON'T WANT TO OWN IF THEY DO RAISE RATES. I THINK CASH IS A GOOD COMPONENT RIGHT NOW. ALIX: I KNOW YOU ARE A LOVER OF GOLD BUT GOLD HAS NOT BEEN TAKING ANY BENEFIT FROM THIS CONUNDRUM. IF YOU TAKE A LOOK AT WHERE THE FALLOUT MIGHT BE, WE HAVE SEEN STRONGER GROWTH IN THE U.S.. IT SEEMS THAT IT IS OVERSEAS WHERE IT IS THE ISSUE. WHAT'S THE WORST COUNTRY RIGHT NOW? >> THEY ARE ALL IN BAD SHAPE, BUT I THINK BRAZIL, TURKEY, CHINA, MEXICO -- THESE ARE ALL PLACES WHERE THE CAPITAL IS COMING OUT. THOSE CENTRAL BANKS HAVE A DILEMMA BECAUSE THEY WANT TO CUT RATES BECAUSE THEY WANT THE GROWTH. ON THE OTHER HAND, THE CORPORATIONS HAVE BORROWED ENORMOUS AMOUNT OF DOLLARS. THAT MAKES THE DOLLAR STRONGER, WHICH MEANS THEY CAN'T PAY THEIR DEBTS. THEY EITHER HAVE -- THAT'S WHY I SAY THIS RESEMBLES 1997. IT STARTED IN 1997 WITH THE THAI CURRENCY. >> --ALIX: WHY ARE WE SEEING THIS REFLECTED IN THE GOLD MARKET AT ALL? A SORT OF RUSH TO SAFETY LIKE THE DOLLAR IN THE TREASURY MARKET QUESTION >> I THINK WE ARE AND HERE IS WHY. THIS IS A DEFLATION TRADE. EMERGING-MARKET CURRENCIES ARE COLLAPSING, BUT GOLD HAS GONE DOWN A LITTLE BIT. IT IS SORT OF HOLDING ITS OWN. I WOULD EXPECT A HIGHLY DEFLATIONARY ENVIRONMENT, I WOULD HAVE EXPECTED GOLD TO GO DOWN TO 900. THE FACT THAT IT IS HANGING IN AROUND $1100 OR $1200 SHOWS RELATIVE STRENGTH WILL STOP YOU HAVEN'T SEEN THE PRICE SOAR, BUT WHY WOULD IT IN A DEFLATIONARY ENVIRONMENT? RISING REAL RATES ARE BAD FOR GOLD, BUT GOLD IS HANGING IN

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Rickards: FED Has Major Conundrum