Currency Wars: The Making of the Next Global Crisis
Format: PDF / Kindle (mobi) / ePub
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.
real, to the U.S. dollar . . . The discussion of Brazilian currency crises and developments draws on Riordan Roett, The New Brazil, Washington, D.C .: Brookings Institute Press, 2010. Chapter 7 127 Author David Rothkopf brought this concept to light . . . David Rothkopf, Superclass: The Global Power Elite and the World They Are Making, New York: Farrar, Straus and Giroux, 2008, 174–75. 127 “We have a convening power here that is separate from the formal authority of our institution . . .”
(Summer 1948): 193–210. 197 A breakthrough in the impact of social psychology on economics . . . This work on what became the foundation of behavioral economics is contained in two volumes: Daniel Kahneman and Amos Tversky, eds., Choices, Values, and Frames, Cambridge: Cambridge University Press, 2000; and Daniel Kahneman et al., eds., Judgment under Uncertainty: Heuristics and Biases, Cambridge: Cambridge University Press, 1982. 201 If they are diverse they will respond differently to various
mistakes of his life. By the time massive deflation and unemployment hit the United States in 1930, England had already been living through those conditions for most of the prior decade. The 1920s were a time of prosperity in the United States, and both the French and German economies grew strongly through the middle part of the decade. Only England lagged. If England had turned the corner on unemployment and deflation by 1928, the world as a whole might have achieved sustained global economic
especially in manufacturing, assembly and textile industries. They were the precursors of a much larger program of economic development zones launched in 1984 involving most of the large coastal cities in eastern China. Although China grew rapidly in percentage terms in the mid-1980s, it was working from a low base and neither its currency nor its bilateral trade relations with major countries such as the United States and Germany gave much cause for concern. Today’s currency war is marked by
moves of other cells. Every battle station was equipped with a laptop linked to groupware that enabled each player to provide continuous silent commentary on game progress even while others were describing their moves and motives. Adjacent to the war room was a technical support room that controlled the screen projections and monitored the groupware supporting the running commentary. Down a corridor from the war room were separate large meeting rooms that had been outfitted as the “capitals” of