Currency Wars: The Making of the Next Global Crisis

The short story is that I think this book is excellent. I consider it required reading -- and in fact re-reading as well -- for investors who rely on an informed macroeconomic perspective to guide their decision-making, and for those interested in the science of monetary economics. Below are some passages from Currency Wars that I thought were especially insightful. They put forth prospective answers to many key questions that many traders will want to consider. How Does the Global Economic Crisis Get Resolved? "The new crisis will likely begin in the currency markets and spread quickly to stocks, bonds, and commodities. When the dollar collapses, the dollar-denominated markets will collapse too. Panic will quickly spread throughout the world. As a result, another US president, possibly Obama, will take to the airwaves and cyberspace to announce a radical plan of intervention to save the dollar from complete collapse, invoking legal authority already in place today. This new plan may even involve a return to the gold standard. If gold is used, it will be at a dramatically higher price in order ot support the bloated money supply with the fixed quantity of gold available. Americans who had invested in gold earlier will be confronted with a 90% "windfall profits" tax on their newfound wealth, imposed in the name of fairness. European and Japanese gold presently stored in New York will be confiscated and converted to use in the ervice of the New Dollar Policy. No doubt the Europeans and Japanese will be given receipts for their former gold, convertible into New Dollars at a new, higher price. Alternatively, the president may eschew a return to gold and us an array of capital controls and global IMF money creation to reliquify and stabilize the situation. This isn't far-fetched speculation. It has all happened before. Time and again, paper currencies have collapsed, assets have been frozen, gold has been confiscated, and capital controls have been imposed." Is Widespread Military Conflict Likely? "A conventional military confrontation with the united States seems highly unlikely because of the United States' ability to suppress and ultimately decimate the opposing side. As a result, rival nations and transnational actors such as jihadists have increasingly developed capabilities in unconventional warfare, which can include cyberwarfare, biological or chemical weapons, other weapons of mass destruction or now, in the most unexpected twist of all, financial weapons...the costs of a financial war might be far less than the costs of an arms race and possibly be much more effective at undermining US power than a military confrontation." How Do Currency Wars -- When Economies Compete to Devalue their Currencies -- Start? "Currency wars begin in an atmosphere of insufficient internal growth. The country that starts down this road typically finds itself with high unemployment, low or declining growth, a weak banking sector, and deteriorating public finances. In these circumstances, it is difficult to generate growth through purely internal means and the promotion of exports through a devalued currency becomes the growth engine of last resort." Do Currency Devaluations Help an Economy? "A country that cheapens its currency may make final sales look cheaper when viewed from abroad but may hurt itself as more of its cheap currency is needed to purchase various inputs." Have Currency Wars Happened Before? What Was the Outcome? "Currency War I began in spectacular fashion in 1921 in the shadow of World War I and wound down to an inconclusive end in 1936. In round after round of devaluation and default, the major economies of the world raced to the bottom, causing massive trade disruption, lost output and wealth destruction along the way. The volatile and self-defeating nature of the international monetary system during that period makes Currency War I the ultimate cautionary tale for today as the world again confronts the challenge of massive unpayable debt." How does China play into the Euro crisis? "China has a vital interest in a strong Euro. The European Union surpasses the United States as China's largest trading partner. China's interest in supporting the Euro is as great or greater than its interest in maintaining the yuan peg against the dollar." How is China affecting the gold market? "Between 2004 and 2009, China secretly doubled its official holdings of gold. China used one of its sovereign wealth funds, the State Administration of Foreign Exchange (SAFE), to purchase gold covertly from dealers around the world. Since SAFE is not the same as the Chinese central bank, these purchases were off the books from the central bank's perspective." What are the Possible Outcomes for the end of the Reign of the US Dollar? "Taking a range of views from the conventional to the cutting-edge, we can foresee four outcomes in the prospect for the dollar -- call them The Four Horsement of the Dollar Apocalypse. In order of disruptive potential from smallest to greatest, they are: multiple reserve currencies, Special Drawing Rights, gold, and chaos." What are Special Drawing Rights (SDR)? "The SDR is world money, controlled by the IMF, backed by nothing, and printed at will. Once the IMF issues an SDR, it sits comfortably in the reserve accounts of the recipient like any other reserve currency."

I don't consider myself much of financial wiz or to have any far reaching knowledge in terms of global financial markets or economics. That being said I do my best to analysis the world around me in an attempt to figure out what is going on and how it impacts the general population. I cling to the mantra that all the knowledge in the universe is worthless unless it can be applied. This book fills in a lot of gaps in my opinion and more or less synthesizes what I have been trying to piece together over the last decade. Not only does the light bulb turn on, it stays on and continues to burn brighter throughout the book. The book is written in such a way that most humans shouldn't have any problem processing it. I believe very little of what I read, facts and opinions are often pushed out there in such a way to benefit the person sharing the information, helping defeat any bit of cognitive dissonance that may arise in their own world. This book seems to be fair in my opinion. Not really playing any side to any extreme, it feels like it is balanced for the most part. I don't feel it answers any of the BIG questions but I don't think that was the aim. I feel it was written to educate people. In the end I feel it gives the average person a much more sound understanding of some of the reasons/actions that have brought us to the present(and past) financial dilemma. It really isn't as messy as I had thought. It is simply a bunch of independent parties attempting to play together as a team but each having their own interests driving their actions. There is always going to be an equal and opposite reaction, it is just a matter of who is on the action role vs. who is in the reaction role. Kind of like the social unrest throughout the world, people freak out but I think if they had this to read they may get a better understanding of why governments and central banks do what they do. There is always the human/self interest variable that must be accounted for regardless if we agree with the outcome of those interests as they manifest in the short and long terms. Again, I don't know all that much but I feel more aware after reading this book. As a lay person, it has increased my knowledge base thus increasing my quality of life by giving me a map to reference when I look at macro issues and then apply the knowledge to my little micro life. Buen Trabajo Mr. Rickards.

Currency Wars is without a shadow a doubt both a scholarly and imaginitive work. Rickards touches on a much discussed theme in modern economics, the increasing stress and viability of the dollar. In some ways this work is similar to Barry Eichengreen's Exorbitant Privilege, however Rickards looks at a more global scale of currency collapses, and provides both historical precedents, and possible scenarios in which the dollar could collapse. Additionally, the book contains some decent critiques of economic schools of thought, such as Keynesianism, Monetarism, and Financial Economics, as well as a decent critique of complexity theory. While not simply an economic text book, Rickards provides his own critique and insights to the strength and failings of these approaches. Currency Wars provides a decent history of monetary policy, and an ample divination of what could come if decent policy is not implemented, and mistakes of the past are not learned from. The only criticism I have of Currency Wars is the opening. The war games introduction is too wordy, and filled with details that the readers of the book did not intend to read. On the whole, an excellent and thought provoking book. More suited for those already familiar with economics, but accessible to all provided it is read carefully and terms are referenced. I can only hope that this finds its way onto the desks of Ben Bernanke and Barack Obama.

Loved the book. Makes you realize how crooked world governments are and how we are being manipulated by the oligarchs. Very well written and informative.

Delivered the next day. A good book by James Rickards. I like all his books -Road to Ruin , Aftermath and The new case of Gold.

The book is well written, pleasant to read and you can tell that the author has made an effort to explain historical events up to this day to explain the matter at hand. In short, it's about the monetary gold standard, why the gold standard was abandoned and what we could do today to avoid currency wars in a time where there is no gold standard. I liked the way the book was written and got a lot of insight into a financial topic that was often tied to global politics (e.g. world wars, oil crises, etc). Recommendation from my side!

In the end, we all bear some measure of responsibility for allowing the financial world to threaten and put at risk the stability of societies millennia in the making. The accumulated efforts of countless generations, including ours, are invested in our societies. We live richer and more beneficial existences than our hunter gatherer forebears. We are able to think and educate ourselves and our children in ways unimaginable to previous generations. Mr. Richards makes a good case for investing the necessary effort to safeguard a most valuable asset, namely civilization itself.