Saturday, February 18, 2012

Book Review: Currency Wars

James Rickards sounds the alarm on what may lay ahead in Currency Wars:  The Making of the Next Global Crisis.  The central theme is that nations deliberately devalue their own currency in order to make their trade goods more competitive.  Other nations, in turn, retaliate by devaluing their currency, thus establishing a vicious downward cycle until an economic crash, like the Great Depression, brings everything to a halt.

The book is divided into three parts.  In Part One, Rickards describes his role in Financial Wargame conducted by the Pentagon.  The US came in last place, in part, because the Russian players began buying-up gold reserves and refusing to accept dollars for trade payments.  The game ended before there was a collapse on the dollar, but enough of the "playing pieces" were in place to cause one.

Part Two discusses the history of the various monetary standards employed from the Classic Gold Standard (1870-1914), through "Currency Wars I, II & III," (1921-1936, 1967-1987 and 2010--, respectively). 

Then in Part Three, after discussing the technical and theoretical aspects of financial systems, Rickards speculates on what could happen next if the US continues on it's current financial course.  Basically, the three options are:  Another currency supercedes the dollar in international finance and trade, or the world goes back to some form of gold standard, or financial chaos.

I'm no economist, but I do see that our government's $15 trillion defecit, along with our trade defecit, is a danger to our economy and even our national security.  I'm also uneasy about the idea of vast amounts of money being printed, that is not tied to anything of intrinsic value, like gold.

Despite the dire possibilities of the future, I enjoyed reading the book and found it very informative.

Published just a few months ago (November 2011), 85 readers, posted reviews on  An overwhelming 69 reviewers gave the book a 5-star rating.  The numbers fall off drastically from here, with 8 x 4-star reviews, 5 x 3-stars, 1 x 2-star and 2 x 1 stars.  One of the 1-star ratings was merely a ploy to get the author's attention, in order to pose a question.  I give the book a solid 4-stars.  If I knew more about economics, along with trade and finance, I'd probably give it a full 5 stars.  And maybe look into buying gold...

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