I recently had a chance to read Currency Wars: The Making of the Next Global Crisis by James Rickards and highly recommend it. In short, Rickards describes some of the weaknesses in our economic system, describes the historical precedent for conflicts over currencies, discusses some ongoing currency conflicts and offers some speculation on potential scenarios involving the US dollar. Some of the material will be old news for people who follow contrarian economics, but Rickards brings in a unique perspective towards the state of currencies in the world.
A few things I took away from the book:
– Conflicts aren’t always fought with arms and economic ones can be just as crippling.
– We’ve got the biggest, baddest military in the world but economic wars could be our Achilles heel. The author gives a chilling account of war games that he participated in with the Department of Defense and how catastrophic the results could be.
– Historically economic disputes have led to armed hostilities. Bad news all around.
– Currencies have historically come and gone on the planet and their value goes with it, unless the currency has intrinsic value (i.e. silver and gold). For example, you can’t buy anything in Paris with pre-euro French francs – they have no value. A 20 franc gold coin is made of slightly less than 1/5 of an ounce of gold and currently has more value due to the gold than the francs ever did. As I recently wrote in Saving Copper Pennies, pre-1982 pennies will have intrinsic value as copper that will transcends the value of the one cent assigned to it by the US Government should the US ever dissolve. I’m not going to suggest that gold, silver and copper are the end-all-be-all of money (although they are pretty cool and worth investing in), but I feel a little bit safer with something tangible over just having paper and an agreement. If you don’t think that it’s possible for states (as well as their currencies) come and go on this planet, watch this.
– Rickards points out that there can be downturns with stocks or bonds, inflation, depression, etc. with one or more of our economic system chugging along just fine. The currency is the common denominator in all of these factors and potentially our weak link.
– Our national debt is the elephant in the room that no one wants to discuss, let alone tackle, in a meaningful manner.
– The cover art is pretty sweet. Take a closer look:
– The kind of economic calamity described in the book is out of my hands (and yours), but we can build our lives in a way that if/when this thing happens, we’ve got some protection. This involves finding your own income streams, producing your own food, storing food and supplies, reducing your debt, smart financial management, building community and general self-reliance. I’ll share what I know and what I learn along the way on this blog.