Currency Wars: The Making of the Next Global Crisis

( 20 )

Overview

In 1971, President Nixon imposed national price controls and took the United States off the gold standard, an extreme measure intended to end an ongoing currency war that had destroyed faith in the U.S. dollar. Today we are engaged in a new currency war, and this time the consequences will be far worse than those that confronted Nixon.

Currency wars are one of the most destructive and feared outcomes in international economics. At best, they offer the sorry spectacle of ...

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Overview

In 1971, President Nixon imposed national price controls and took the United States off the gold standard, an extreme measure intended to end an ongoing currency war that had destroyed faith in the U.S. dollar. Today we are engaged in a new currency war, and this time the consequences will be far worse than those that confronted Nixon.

Currency wars are one of the most destructive and feared outcomes in international economics. At best, they offer the sorry spectacle of countries' stealing growth from their trading partners. At worst, they degenerate into sequential bouts of inflation, recession, retaliation, and sometimes actual violence. Left unchecked, the next currency war could lead to a crisis worse than the panic of 2008.

Currency wars have happened before-twice in the last century alone-and they always end badly. Time and again, paper currencies have collapsed, assets have been frozen, gold has been confiscated, and capital controls have been imposed. And the next crash is overdue. Recent headlines about the debasement of the dollar, bailouts in Greece and Ireland, and Chinese currency manipulation are all indicators of the growing conflict.

As James Rickards argues in Currency Wars, this is more than just a concern for economists and investors. The United States is facing serious threats to its national security, from clandestine gold purchases by China to the hidden agendas of sovereign wealth funds. Greater than any single threat is the very real danger of the collapse of the dollar itself.

Baffling to many observers is the rank failure of economists to foresee or prevent the economic catastrophes of recent years. Not only have their theories failed to prevent calamity, they are making the currency wars worse. The U. S. Federal Reserve has engaged in the greatest gamble in the history of finance, a sustained effort to stimulate the economy by printing money on a trillion-dollar scale. Its solutions present hidden new dangers while resolving none of the current dilemmas.

While the outcome of the new currency war is not yet certain, some version of the worst-case scenario is almost inevitable if U.S. and world economic leaders fail to learn from the mistakes of their predecessors. Rickards untangles the web of failed paradigms, wishful thinking, and arrogance driving current public policy and points the way toward a more informed and effective course of action.

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Editorial Reviews

Publishers Weekly
In 2008, Rickards, an investment banker with extensive experience in hedge funds, was invited to participate in a seminar sponsored by the Department of Defense, which examined the safety of U.S. sovereign wealth funds in the case of economic warfare. As Rickards explains, "Sovereign wealth funds are huge investment pools established by governments to invest their excess reserves." He participated in further seminars that addressed the impact of futures markets, derivatives, and more, on strategic commodities such as oil, uranium, copper, and gold. Rickards's first book is an outgrowth of his contributions and a later two-day war game simulation held at the Applied Physics Laboratory's Warfare Analysis Laboratory. He argues that a financial attack against the U.S. could destroy confidence in the dollar. In Ricards's view, the Fed's policy of quantitative easing by lessening confidence in the dollar, may lead to chaos in global financial markets. Possible strategies for dealing with such a situation include a return to the gold standard. Though the book will no doubt interest policymakers, even non-experts will be rewarded for their efforts. (Nov.)
Kirkus Reviews
A pioneer in the use of market intelligence for strategic purposes warns of the coming collapse of the dollar-based financial system. In Rickards' view, the world is currently going through a third currency war ("CWIII") based on competitive devaluations. CWII occurred in the 1960s and '70s and culminated in Nixon's decision to take the dollar off the gold standard. CWI followed WWI and included the 1923 German hyperinflation and Roosevelt's devaluation of the dollar against gold in 1933. Rickards demonstrates that competitive devaluations are a race to the bottom, and thus instruments of a sort of warfare. CWIII, he writes, is characterized by the Federal Reserve's policy of quantitative easing, which he ascribes to what he calls "extensive theoretical work" on depreciation, negative interest rates and stimulation achieved at the expense of other countries. He offers a view of how the continued depreciation and devaluation of the dollar will ultimately lead to a collapse, which he asserts will come about through a widespread abandonment of a worthless inflated instrument. Rickards also provides possible scenarios for the future, including collaboration among a variety of currencies, emergence of a world central bank and a forceful U.S. return to a gold standard through an emergency powers–based legal regime. The author emphasizes that these questions are matters of policy and choice, which can be different. Intriguing thinking about these current potentials and their history, especially given the dollar's pervasiveness in the pricing and exchange of global assets.
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Product Details

  • ISBN-13: 9781591844495
  • Publisher: Penguin Group (USA)
  • Publication date: 11/10/2011
  • Pages: 304
  • Sales rank: 215,682
  • Product dimensions: 6.30 (w) x 9.26 (h) x 1.03 (d)

Meet the Author

James Rickards is a counselor, investment banker, and risk manager with over thirty years' experience in capital markets. He advises the Department of Defense, the U.S. intelligence community, and major hedge funds on global finance, and served as a facilitator of the first ever financial war games conducted by the Pentagon. A frequent guest on CNBC, CNN, Fox, C-SPAN, Bloomberg TV, and NPR, Rickards also lectures at Northwestern University and at the School of Advanced International Studies.

Visit currencywarsbook.com

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Table of Contents

Preface xiii

Part 1 War Games 1

Chapter 1 Prewar 3

Chapter 2 Financial War 17

Part 2 Currency Wars 35

Chapter 3 Reflections on a Golden Age 37

Chapter 4 Currency War I (1921-1936) 56

Chapter 5 Currency War II (1967-1987) 78

Chapter 6 Currency War 111(2010-) 98

Chapter 7 The G20 Solution 125

Part 3 The Next Global Crisis 143

Chapter 8 Globalization and State Capital 145

Chapter 9 The Misuse of Economics 168

Chapter 10 Currencies, Capital and Complexity 195

Chapter 11 Endgame-Paper, Gold or Chaos? 226

Conclusion 255

Afterword 259

Acknowledgments 267

Notes 271

Selected Sources 279

Index 289

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Customer Reviews

Average Rating 4
( 20 )
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Sort by: Showing all of 20 Customer Reviews
  • Anonymous

    Posted June 19, 2012

    I just bought the Nook version of this book and couldn't put it

    I just bought the Nook version of this book and couldn't put it down. I've just started to learn about economics the last four years and highly recommend this book. If you are just starting to learn about our financial system or have been around I still recommend. The author is very informed and backs up all ideas with facts, history, etc., so unlike other economic books with too much political slant. It starts out as a narrative and then towards the middle he really starts to address the impact of dollar on world currencies...must read. Very rare to find an "economic" book with "suspense"...

    4 out of 4 people found this review helpful.

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  • Anonymous

    Posted December 3, 2011

    Great read

    A compeling thesis on monetary instability.

    4 out of 4 people found this review helpful.

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  • Posted November 14, 2012

    This is an excellent book and well worth your time to read it.


    This is an excellent book and well worth your time to read it.
    I'm not sure why some reviewers did not like the book since
    their arguments were incoherent with respect to the authors
    main points. Perhaps it is because they disagree with his
    conclusion as to the best way to avoid Ruinous economic
    consequences Precipitated currency wars.

    3 out of 3 people found this review helpful.

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  • Anonymous

    Posted June 24, 2012

    A great read!

    Extremely enlightening. This is a must read if you are interested in macro economics.

    3 out of 3 people found this review helpful.

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  • Posted December 12, 2011

    So serious Pentagon involved in it now.

    For me this was light reading, perhaps not enough substance. But, interesting that Pentagon was involved in staging such war games, i.e. involving currency as war. We are apparently witnessing it today, via Dollar, Euro, Pound, Renminbi.

    Author predicts four stages, from what we see today to SDR, and basket of currencies, only to end in gold as the final solution.

    3 out of 5 people found this review helpful.

    Was this review helpful? Yes  No   Report this review
  • Anonymous

    Posted January 14, 2013

    Awesome book that should be required reading for every American, and easy to read!

    After graduate studies in government, social sciences, and real estate, and 30 years of dealing with the consequences of our monetary policy in the real estate business, this is the first book I've seen that gives a broad and long perspective on the role of monetary policy in history. I pick my writers carefully so as not to bore myself, so after enjoying Michael Lewis, I decided to "plow through" this book only to understand what is going on today. It was surprisingly easy plowing. Rickards brings it all very much to life, and covers a huge amount of (extremely relevant) ground in a short time... with elegant illustrations and an intellectually honest, balanced treatment. Highly recommended to anyone planning to live through the next decade, or who would like to understand the news!

    2 out of 2 people found this review helpful.

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  • Anonymous

    Posted June 7, 2012

    Dry

    Couldnt get through it

    1 out of 2 people found this review helpful.

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  • Posted March 16, 2012

    Light reading Richards reports in all-embracing detail - office

    Light reading
    Richards reports in all-embracing detail - office layouts, furniture arrangements, beverages drank, foods eaten, etc. - the preparation for and events of a multi-day conference sponsored by DOD. Not sure of the overall cost of the operation or its usefulness because before too many pages are past the reader is rather disinterested.
    A reference to the Drudge Report by the author as a prime source of his financial information is rather telling.

    1 out of 5 people found this review helpful.

    Was this review helpful? Yes  No   Report this review
  • Anonymous

    Posted February 10, 2012

    Interesting

    A look at how markets can be manipulated to ruin a country. They are doing it to Iran right now, but it turns out it can be done more subtly...

    1 out of 1 people found this review helpful.

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  • Anonymous

    Posted December 22, 2011

    Interesting - highly recommended

    This is one of types of book that makes you think about what could and might happen. The basic arguments seem sound and the conclusions all seem possible. In fact I would say much of the book has to say is just down right scary. It was well worth time needed to read and think about it's contents.

    1 out of 1 people found this review helpful.

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  • Anonymous

    Posted January 25, 2012

    Great book excellent read a must for all concerned with the gobal economy

    A must read

    0 out of 1 people found this review helpful.

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  • Anonymous

    Posted June 16, 2013

    No text was provided for this review.

  • Anonymous

    Posted November 19, 2011

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  • Anonymous

    Posted November 14, 2011

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  • Anonymous

    Posted July 4, 2012

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  • Anonymous

    Posted March 30, 2012

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  • Anonymous

    Posted October 5, 2012

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  • Anonymous

    Posted November 10, 2011

    No text was provided for this review.

  • Anonymous

    Posted February 4, 2012

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    Posted December 29, 2011

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