About book The Death Of Money: The Coming Collapse Of The International Monetary System (2014)
This is a very well-researched book. Some fairly hardcore ideas in here, many of which were already familiar to me because I've read a great deal of his colleagues' work.There are lots of very compelling arguments, and it's not good news. I'm in absolute agreement that we're in a new era of de facto fascism in Western democracies. The bureaucrats and elite are tightening their grip on our lives, and lying through their teeth. But the problem with this kind of stuff is that it sends you running scared a decade early. Various people at Agora have called the crash and the death of money since 1999. And it can make you a really bad investor. Read the arguments and make your mind up. Take some action, but not all of it, and not yet.On the plus side, he doesn't advise readers to buy a pump-action shotgun, stock up on dried and tinned food and buy a cabin in the mountains. Despite its apocalyptic title, this is not really an end-of-days book. James Rickards is an astute analyst, and what he's writing about here is not really disappearance of the international monetary order so much as its transition into something radically new. What sets him apart from at least some of the other writers focusing nowadays on similar issues is that he has some fairly well-grounded ideas about what shape the new order may be trying to take. And while we're not talking quite Book of Revelation stuff here, the metamorphosis he envisions is inevitably a traumatic affair, particularly for the United States, whose currency enjoys a privileged status that cannot be expected to survive the approaching seismic shift.So far as I can tell, Mr. Rickards is not an academically-trained economist. He is a fund manager who focuses on macro issues affecting his investments. However, he's well enough respected for his knowledge of the global monetary system that the U.S. Defense Department consults with him in war-scenario planning exercises, where hypothetical attacks against financial market targets are standard fare anymore. And he seems well-enough versed in conventional economic theory too. He just doesn't consider it much help in coming to grips with the real crisis affecting the global economy today. For Rickards is a student of "Complexity Theory". And as such he does not offer any neatly-packaged prognostications of the type dear to the hearts of most academic economists. Complexity theorists, when applying their vision to economics, see financial markets as seas of mostly hidden variables, all of them playing off one another in ways that can never be predicted with any semblance of exactitude. Small movements morph into storms before much at all is apparent. And while the rough direction of things can sometimes be discerned, sudden events have a way of exploding out of nowhere and turning the picture upside-down. For economists and investors, according to Rickards, this is just the nature of the environment they inhabit, whether they know it or not. Economic complexity is bad enough at a national level. It becomes orders of magnitude worse when we go global. In this book Rickards takes us on a quick guided tour of the world's economies, and he doesn't show us much to bring comfort to anyone hoping for a orderly resolution to our current problems. The United States is front-and-center to his critique, because the dollar remains the world's most important currency, and its precarious state threatens everybody. He flogs the dollar with the usual observation, i.e., that chronic trade and budget deficits and decades of increasingly easy money support a national consumption we've lost the ability to pay for. He says we get away with it only because of the reserve currency status, which forces other countries - most importantly China - in greater and lesser degrees to benchmark their currencies to the dollar, thereby exporting to them what should be domestic inflation in the U.S.Interestingly, though, he is if anything even harder on China than he is on the U.S. He considers China ruled by what the calls a "parasitic elite" which manipulates a centralized state for its own benefit while distorting its economy with massive and wasteful infrastructure spending. He seems to regard China as a bubble economy and a huge crash site awaiting impact. Making his way around the major economies, Rickards hammers Japan a well. He portrays it as a sort of microcosm for the rest of the developed world, calling it the "canary in a coal mine". Coping for many years with deflationary pressures, Japan is now, under Prime Minister Abe, attempting to break out with massive inflationary over-compensation that offers little hope of finding a stable equilibrium.In what might strike some readers as incongruous, Rickards actually takes a moderately optimistic tone in his discussion of Europe. Dismissing the fears of "Euro-skeptics" , he argues that the economic power of Germany is sufficient to ensure the Euro's survival. Conceived as a kind of monetary glue for holding Europe together, the Euro is central to Germany's determination to ensure a permanent end to the continent's history of cataclysmic internecine wars. Survival, however, does not imply stability, and in the last analysis Rickards sees the Euro as one more in the global stew of fiat currencies headed towards a reckoning He rounds out his monetary tour with brief discussions of the world's peripheral markets that Western bankers have, for marketing purposes, cobbled together under various cutesy acronyms: BRICS, BELLs, GIIPS, PIGS, and so forth. Rickards sees tiny rays of hope in certain of these places, but within the context of his Complexity Theory world view, any one of them is capable harboring the hidden spark poised to trigger a global contagion. Which brings us around to Rickards' Idée Fixe, which is Gold. Insisting he is not a "Gold Bug", Rickards at one point even pokes gentle fun at theorists who see a return to a gold monetary standard as the only hope for heading off economic apocalypse. However, he then goes on to demonstrate that the pejorative term hardly has any meaning if it doesn't apply to him. For Rickards subscribes to the belief that gold itself is the only "true" money, and that its value is fixed. Apparent movements in its price should instead be viewed as fluctuations in the prices of the world's various fiat currencies, all of which revolve around it like so many planets orbiting the sun. This is, of course, a semantical point that is axiomatically true if we buy into his way of thinking. Most people, including myself, find it little hard to swallow today, in light of the fact that not one of the world's central banks recognizes any official relationship between gold and the value of its currency.Rickards, however, works very hard to cover his base. He devotes quite a bit of text to the behavior of our central banks, who have since officially demonetizing gold in the 1970's, continued not only to hold it in large quantities but to actively trade it. Some banks, notably those of China and Russia, have even taken to accumulating new gold directly from their national mining industries. Those of us tending to see monetary gold as an anachronism generally have a hard time explaining this behavior. Rickards, for his part, explains it matter-of-factly. Far from seeing central bankers as out-of-touch bureaucrats, he writes about them as though they were about the only people in the world today really understanding what's going on, even if their true goals remain hidden behind their public agendas. He implies that, as a group, they fully understand that the fiat currency systems they manage are headed for collapse, and that they are all scrambling to pre-position themselves for the new monetary order. He doesn't portray them as wicked conspirators so much as institutions jockeying for position among themselves while struggling to salvage a degree of order out of the impending chaos. Richards views the International Monetary Fund, far from being the obsolete institution some observers consider it to be, as standing front and center in the new international system. Its Special Drawing Right instrument, created in 1969 as a Reserve Currency supplement, has since its inception remained in the shadow of the U.S. dollar. Rickards, however, sees it or something akin to it emerging in the new order as the primary international reserve asset and a kind of global money, albeit in a radically redesigned form. The world's existing powers will negotiate the new design, with the power of their negotiating positions being determined, as it was at Bretton Woods in 1944, by their gold holdings and by the relative size of their economies. The existing SDR represents a basket of currencies - dollar, euro, yen, and pound - that is plainly obsolete and will be re-examined under the blazing light of crisis and replaced with something more representative of the world's economic balance. The dollar will still have power but one far diminished on a relative basis, particularly with regard to China's RMB.What this means for Americans, if Rickards is right, is that our reserve currency subsidy will disappear and the purchasing power of our money will be sharply diminished. Living for us will become a lot more expensive.I'm sure that many readers regard James Rickards as a crackpot, and this book does indeed at times verge on crankishness. However, he's too knowledgeable and writes in too measured a tone for his views to be dismissed quite so readily in my opinion. At the very least, Death of Money is informative and thought-provoking, and I recommend it.
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Well written explanation of how screwed the world is - but I already knew that. ;-)
—MandyRain145
We're all screwed.Buy some gold and run for the hills.
—dreamingpotatoes
Wow. That. Wow. Prediction on market turns.
—Dally
