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The best thing since sliced bread?
on November 11, 2011
Jim Rickards, who is famous, among other things, for his ability to accurately predict the Fed's moves ahead of time. His most recent accurate call was the implementation of Operation Twist, i.e the selling of short-term government debt and the buying of long-term government debt in order to increase short-term interest rates and decrease long-term interest rates.
The main theme of the book is that the world is already heading toward a full-blown currency war which will bring even harsher economic turmoil to the world economy than the one we experienced in the last three years since the housing bubble burst in the U.S.
Rickards explores in depth, basing his arguments on past currency wars such as the one after WW1 between several European countries and the U.S., and why currency wars are a lose-lose situation. In short, Rickards's main argument is that countries around the world are devaluing their currencies in order to boost their exports (domestically produced goods and services will be cheaper for foreigners) thereby increasing their GDP. However, such actions will frequently be met by mutual currency devaluation by other countries or by some protectionist policy such as tariffs. Therefore, countries will gain a temporary advantage until other countries retaliate, the end result of which will be: inflation brought on from currency devaluation, protectionism and the halt of free trade, thus - wealth destruction. And in a worst case scenario, an outright military conflict.
As was mentioned above, I found Rickards's thesis to be well argued and backed with plenty of historical facts. To sum up, this book just has it all, great and engaging writing, fascinating economic history, and shrewd analysis of the current and coming global crisis.