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
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
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