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.

James Rickards' "Currency Wars: The Making of the Next Global Crisis" provides a crucial insight into the world of currency. The book describes the critical parts of history in the currency market and also describes the possible outcomes or the future of the currency market. The currency market is like the bedrock of world economies. Manipulations in the currency market has led to whole economies rising and falling. It is these manipulations that the book details. First, the book describes a war game scenario played the U.S. government to determine how currency can be a threat to national security. Afterwords, the book describes the history of three currency wars. The first was during 1921-36, the second was during 1967-87, and the third is ongoing starting from 2010. The book also describes the what it was like prior to the existence of the Federal Reserve and when currencies were pegged to gold. Then the book also provides a small lesson in economic theories. Some of these theories, the author believes, are toxic and can lead or has led to financial collapses. The book also describes the complexity theory. This theory describes the rise and fall of complex systems such as civilizations. Based on this theory, the author provides possible outcomes, or the future, for currency markets. The book contains a chock-full of detail. This book explains the motivations of the Federal Reserve. It describes why Ben Bernanke is not a fan of gold. The book describes what an SDR is and why there are those interested in making it a global currency. There many who don't want the U.S. dollar to be a reserve currency and are trying to move away from using the dollar in international trade. The book describes what an economy would be like if a currency went back to a gold standard. The book describes the role of the G20. One impression I get from this book is that some countries are so eager to devalue their currency so that they can export their goods more easily. One takeaway is that China imported a significant amount of inflation from the U.S. by pegging the yuan to the dollar. The author seems to believe based on complexity theory that simplification, or to reduce the size of complex systems, may be a key to prevent another financial collapse and engender an efficient economy. Examples of simplification may be a smaller government and breaking up big banks into smaller banks. Sounds like returning power back to the states may be a solution for the federal government. The book is quite different from the typical financial books in that it offers a perspective in a little known but huge exchange market. I would recommend this book to anybody who is into finance, particular those interested in the currency markets.

Rickards starts with a historical tour, highlighting the near-catastrophic results of two previous currency wars -- the first of which led to the Great Depression and World War II, and the second of which led the malaise and stagflation of the 1970s. In each case, governments desperate to bolster domestic employment vastly increased the supply of their currency (by printing money or through other means) in order to prop up exports. In some cases this tactic worked to some degree over the short term, but over the long term it resulted in competitive currency devaluations with disastrous social and economic consequences. Delving into the current world financial situation, he explains how the Fed, the U.S. Treasury and the IMF are responding to recession and unemployment with the same tactics that decisively failed in the past, and shows how the current situation is in several key ways far worse than other past crises. With Obama's stimulus having failed to accomplish anything but vastly increase federal debt, consumers in debt up to their eyeballs, and a third round of "quantitative easing" on the horizon, the powers-that-be are rapidly running out of sleight-of-hand maneuvers to rebuild confidence and get people spending. Rickards sees a wholesale collapse of the dollar -- and, by extension, the global financial system -- looming ahead. He roots his arguments in recent developments in complexity theory, which seem to indicate that current policymakers vastly underestimate the risk of a systemic collapse. He proposes some common sense reforms to forestall that collapse: breaking up "too big to fail" banks, outlawing most derivatives (which increase complexity while masking risk), and limiting the involvement of banks in risky trading and underwriting -- and one more controversial move: going back to a gold-based currency. This last may seem extreme, but in Rickards' view we are likely headed back to a gold standard (or something worse) whether we like it or not, and it would be better to adopt this standard in an orderly, reasoned manner than to wait until the dollar simply collapses, leaving gold as the de facto standard. This book is a well-written, shrewdly argued, balanced and concise account of the predicament we find ourselves in at the beginning of 2012 -- and what we can do about it. You must read this book.

Jim Rickards, who is famous, among other things, for his ability to accurately predict the Fed's moves ahead of time. His most recent accurate call was the implementation of Operation Twist, i.e the selling of short-term government debt and the buying of long-term government debt in order to increase short-term interest rates and decrease long-term interest rates. The main theme of the book is that the world is already heading toward a full-blown currency war which will bring even harsher economic turmoil to the world economy than the one we experienced in the last three years since the housing bubble burst in the U.S. Rickards explores in depth, basing his arguments on past currency wars such as the one after WW1 between several European countries and the U.S., and why currency wars are a lose-lose situation. In short, Rickards's main argument is that countries around the world are devaluing their currencies in order to boost their exports (domestically produced goods and services will be cheaper for foreigners) thereby increasing their GDP. However, such actions will frequently be met by mutual currency devaluation by other countries or by some protectionist policy such as tariffs. Therefore, countries will gain a temporary advantage until other countries retaliate, the end result of which will be: inflation brought on from currency devaluation, protectionism and the halt of free trade, thus - wealth destruction. And in a worst case scenario, an outright military conflict. As was mentioned above, I found Rickards's thesis to be well argued and backed with plenty of historical facts. To sum up, this book just has it all, great and engaging writing, fascinating economic history, and shrewd analysis of the current and coming global crisis.

This book, though focused on currency wars, offers a wealth of insightful history about the US dollar. Even though it was written in 2011, many of its lessons remain relevant today, especially in understanding how to grow wealth through currency strategies and avoid losing money. Here are some of the key points: - Early in the book, the author highlights President Nixon's announcement on August 15, 1971, when the US officially abandoned the gold standard because gold reserves were too low to support the dollar. Thankfully, Nixon's 1973 agreement with Saudi Arabia, where they agreed to sell oil exclusively in dollars in exchange for US military protection, helped preserve the dollar’s strength. - Thanks to globalization, very few goods are produced entirely within one country anymore. For manufacturing nations, currency devaluation might not be effective since importing raw materials becomes more expensive. - The gold exchange standard was designed to be a self-correcting system. However, central banks started making interest rate and monetary policy decisions based on currency reserves, which gradually caused the system to weaken. - Foreign investors often hold dollars not just because of America's strong economy but also because they trust in the US government and military strength. For instance, Western Europe and Japan rely heavily on the US for their defense and security. - Many understand that Quantitative Easing (QE) involves printing money, but few realize how it actually works and its global effects. When the Fed creates money, it buys Treasury securities from primary dealers, paying with newly printed cash. To decrease the money supply, it sells securities back to those dealers. - By purchasing medium-term debt, the Fed aims to lower interest rates, making borrowing cheaper for homes and businesses, which can boost economic activity. However, this money printing has also led to inflation felt across many countries, sparking unrest, protests, and upheavals worldwide. - The Fed has a dual mission: maintain stable prices and lower unemployment. It also acts as a lender during financial crises and regulates major banks to prevent collapses. The author critiques the way the Fed managed the 2008 crisis, pointing out that instead of letting insolvent banks fail, the government bailed them out, allowing bank owners to continue earning profits at the taxpayer’s expense. - The dollar has lost around 95% of its buying power over time. While wages and prices both increased, the effects weren’t equal. Those who used leverage or understood inflation well—by hedging with assets like gold, land, or art—have fared better than cautious savers or those living on fixed incomes, who saw their wealth diminish. This disparity is a big reason why the rich often get richer while the poor tend to fall further behind.

This is one of Rickards' better books. It is a good intro to a concept rarely discussed; that is world monetary history in terms of the 'war-like' interaction of nations using currency devaluations to gain an upper hand. It's also a bit more than that as he uses his background in trading and economics to theorize a variety of scenarios that could threaten the US in currency markets, gold, derivative markets and others. I found the reading to be attainable and not too dry for the lay reader. This all being said, the weaknesses of the book really lie in sections where Rickards goes beyond reporting history to promulgating ideas of a coming collapse, much of which is based on some assumptions he makes about the importance of gold and how nations will respond to the slightest hiccup in confidence in fiat currencies like the US dollar. For example, the opening chapters are actually pretty interesting as the author lets us in on the first ever "financial war games" exercise sponsored by the US government (he got to play a major role due to research he'd done on systematic weaknesses in financial markets). The funny thing is the author tells of how he basically rigs the exercise to go in the direction he wants by commiserating with a friend over dinner (who is assigned to an opposing team) to push for a coordinated interest in launching a new gold-backed currency. The plan initially backfires and is almost not allowed by moderators until Rickards rallies support, then sells all of his team's gold to the opponent in a sort of self-sacrifice effort to make his friend's plan work after all! If anything, it shows how fragile world economics are at present where a strategic blunder by one nation could turn into absolute turmoil if other nations also make small mistakes in response. The meat of the book is in the three sections on Currency War 1, 2 and 3. It is interesting to get a perspective also on the G20 conferences and responses to the latest financial crisis. His later chapters on the IMF and their use of Special Drawing Rights (SDRs) is also enlightening and a good intro to learn more on this topic that might grow considerably in importance. I think the chapter on the hypothetical of returning to a gold standard and its implications should be taken with a grain of salt. What I did appreciate though was his response to Ben Bernanke's research on the role of gold in worsening the Great Depression. This is an important discussion he left out of his book The New Case for Gold . All in all, its a good quick read and I think you'll enjoy it.

My description of the book is: disjointed. The first few chapters discuss participating in structured war games. I thought the wargame could have been a book in and of it self. Not so much what was provided, but an in-depth approach to his thinking on how to conduct economic warfare as he saw it. Rather, you get, more or less, the Pentagon is thinking about it and planning for it. The worth of the book for the those with a general interest in economics is chapter 9 and 10 which discuss, cursorily, existing differing approaches to macro-economics and risk, and recommended approaches for future analysis. I found the most value in these chapters because I later read about, in depth, about complex systems theory and mathematics of fractals (it actually applies quite a bit believe it or not...they think you're smart but I digress). My criticism is that the structure and analysis of the book is shallow. A couple of chapters about economic war games lacks real detail (not unexpected if disclosure requirements dictate limited disclosure but why include it then?). Another few chapters highlight historical currency wars, also without detail. The final few discuss views on risk management, a touch of predictions without much analysis, and commentary on both. I understand the approach which is for someone who probably grasps capital markets and the basic thinking behind professionals that participate in it, but as an avid reader, the book seemed like a series of memos with different themes. Nonetheless, the topics discussed are pertinent more than ever. It's a worthwhile read, but will only be useful if you already understand prevailing economic and finance theories or are interested in researching them. The author summarizes the theory behind such thought, but, as with much in this world, you have to practice it before you understand criticisms of thought in which a system is based. That said, the author's conclusion about economic theories being misunderstood and misapplied is quite apt. You have to know them to pass a reasoned judgement. In sum, I recommend reading the book, but it's not necessarily something to keep on the bookshelf.

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.

Interesante libro