Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
REVIEWED BY: RAYMOND L. RICHMAN
The book is not about the death of money but it is about the coming collapse of the dollar and the end of the dollar as the international monetary standard. The author predicts an “inevitable” decline of the dollar as the international medium of exchange. Until World War II, most currencies were convertible into gold and the world was then on a gold standard. As one country after another abandoned the gold standard, the U.S. dollar became the preferred medium of international exchange. Except for a short period in the late 1970s when inflation created a lack of confidence in the future of the dollar and even the US Treasury issued bonds payable in Swiss Francs, the dollar was the dominant medium of international exchange and continues to be so until today. In fact the value of the dollar increased in 2014 which seems to contradict Rickard’s predictions. The high value of the dollar makes American goods more expensive to foreigners and puts American manufacturers at a serious disadvantage while making foreign-made goods cheaper and encouraging imports. Rickard’s thesis is that a lack of confidence in the dollar is a necessary outcome of dysfunctional US economic policies.
Inflation increases imperceptibly and gains a foothold before it is recognized but inflation is not the Federal Reserve’s worst nightmare. Deflation is, because it may result in an outright default on the national debt”, a market collapse, bankruptcies and depression. The result would be international chaos. A new monetary standard would become inevitable. The world’s leading powers seem to be pressing for the IMF’s SDRs, Special Drawing Rights, to be the international medium of exchange to succeed the dollar.
The book has three parts. Part I on Money and Wealth has two chapters, one on Prophecy, dealing with our increased capability of detecting early attacks on the US dollar, acts of terrorism, and efforts to crash US financial markets. The second chapter, entitled The War God’s Face, deals with the nature of future wars. Future wars will be wars relying on computers, including precision guided missiles and drones but also cyber wars, designed to cause a collapse of the value of the currency, collapse of securities markets, and a country’s economy.
Part II on Money and Markets begins with a chapter entitled, The Ruin of Markets, in which he criticizes the Fed’s policies to deal with the recession. He writes that it is impossible for central banks and national planners to know the future prices of commodities and goods, stock prices, employment and unemployment, housing prices, and other economic variables. The more they intervene in the economy the more they need to increase the intervention. And the Fed and he Treasury have been making a mess of it. Ch. 4 deals with China's New Financial Warlords” and he writes that China is heading for a fall which will affect the entire world and cause a global depression. Ch. 5, The New German Reich deals with Germany’s leadership and control of Europe’s future and Europe’s economic policies and the future of the Euro. He believes Germany’s influence will be positive. The writes that the euro is strong and getting stronger, just before the Euro took its recent dive against the dollar! Ch. 6, entitled BELLS, BRICS, and Beyond deals with the policies of groups of nations such as the BRICS (Brazil, Russia, India, China, S. Africa), the BELLs (Bulgaria. Estonia, Lithuania, Latvia), the Shanghai Cooperation Organization, the Gulf States, the UK and Japan. Rickards concludes this part writing, “It remains to be seen whether the international monetary system collapses of its own weight or is overthrown by emerging-market losers in response to this crime of the century being perpetrated by the U.S., U.K. and Japanese central banks!
Part III on Money and Wealth deals with what happens after the collapse of the dollar. Ch. 7, Debt, Deficits, and the Dollar, Rickards notes that the Fed is in the business of making loans to private banks and printing money by buying Treasuries and other assets, but internationally it is the IMF that has become the world’s central bank. It has a large gold hoard. In 2008, the G@) countries voted to increase the capital of the IMF by $750 billion, with the US to lend the bank $100 billion in exchange for an interest-bearing IMF note denominated in SDRs. He concludes the chapter, writing that, “.. the IMF is poised to realize its one world, one bank, one currency vision and exercise its intended role as Central Bank to the world.”! Ch. 8, entitled Gold Redux,
Rickards goes on to consider a world gold standard which he hopes will succeed the dollar standard. He writes that the U.S. cannot unilaterally go back on the gold standard because it would cause deflation which would make it impossible to service the debt. So the IMF special drawing rights, the SDRs would have to be on a gold standard with each country’s currency defined as a specific quantity of SDRs. He does not believe a world of multiple reserve currencies, SDRs, yuans, and euros, would work. In Ch. 10, Crossroads, he writes that Federal Reserve policy and monetary policies around the world have brought the world to the brink of an economic disaster. From 2008 to 2014, the Fed increased money from $800 billion to over $4 trillion increasing asset values. Asset values are being inflated from other sources too. Increase in student loans similar to increase in housing before 2008. There is no going back. Finally, in Ch. 11, entitled Maelstrom, he writes that one cannot predict an avalanche but one can avoid it. The U.S. needs time to achieve fiscal reform. Time is needed to create the global SDR market. China needs time to restructure. “The problem is that no time remains…The collapse of confidence in the dollar has begun before the SDR is ready to take its place…the system is blinking red.”
In the final chapter, Conclusion, he writes that the dollar’s demise will take one of three paths: a new world money the SDR, a gold standard, or social disorder. Inflation resulting from the devaluation of the dollar against gold will wipe out savings of all kinds. To protect yourself, take refuge in gold, land fine art, hard assets, hedge funds, energy, transportation, and natural resources, and/or cash as a deflation hedge.
This is a remarkable book. It is full of ideas, information, and data the reader may never had put before him before, most of them good. His pessimistic view of the current world appears justified. The question remains, when and what form will it take?
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