Books: I recently finished reading Currency Wars by James Rickards. It was an insightful and quick read. Mr. Rickards argues that currencies are debased by governments in order to pay for large debt levels with cheaper currency. The book is states that there have been two currency wars: one after The Great War and the second after the United States went off the gold standard under Bretton Woods under Nixon in order to pay debt accumulated for the Vietnam War. Rickards believes we are in the midst of a third currency war. To surmise, countries go around devaluing their currencies against one another and end in trade wars and shooting wars. Therefore, devaluing currency is not in any country’s best interest in the long run. This current fiat currency regime will end with the world returning to some standard based on gold(unlikely), gold and paper (SDR’s or paper currencies trading around a certain band relative to gold) or end with complete chaos (Mad Max).
The other fascinating part of the book is the Pentagon simulated currency war developed and tested at the Applied Physics Laboratory. Different groups of academics and traders played for different ‘teams’ representing different countries including Russia, China, the EU, USA and the Pacific Rim. In the end, a certain country forced its way into a gold backed currency and created a competitive advantage for itself. Other countries began to want to trade in the gold backed currency over the current fiat regime. It is interesting to note that these exercises are taking place my the Unites States military to explore options as to what may happen if the current monetary system collapses.