Currency Wars: The Making of the Next Global Crisis by James Rickards

(New York: Penguin, 2011), 288

Chad Arroyo recommended this when I asked him for Bitcoin reading material, and it was an eye-opening read. The history of monetary policy is a bit more detailed but draws the same conclusion as that in The Bitcoin Standard: soft money is dangerous. This book is a call to action since two of the four end scenarios he forecasts are unlikely (return to gold standard or global SDR currency), one just prolongs the problem (multiple global reserve currencies), and the other is a descent into chaos.

Part I: War Games

Summary: Narrative of his participation in a "war games" exercise that involved capital markets rather than shooting armies.

Part II: Currency Wars

Chapter 3: Reflections on a Golden Age

Summary: Chronicles the history of the classical gold standard (1870-1914), the rise of the Federal Reserve (1907-1913), and how WWI set the stage for the 20th Century's currency wars.

Chapter 4: Currency War I (1921-1936)

Summary: Countries left the gold standard during WWI, and the first currency war was the currency debasement through the 20's and 30's in response to the Great Depression. Mainstream modern dislike for the gold standard has its roots in the prewar gold price artificially maintained through the 1920's.

Chapter 5: Currency War II (1967-1987)

Summary: Bretton Woods reigned after WWII but was ended by Nixon and gold was pretty much off the scene by 1987 with the USD as the global reserve currency backed by the US economy and stable Fed monetary policy. Also the IMF created SDRs (?!)

Chapter 6: Currency War III (2010- )

Summary: The current currency war is Dollar vs Euro vs Yuan.

Chapter 7: The G20 Solution

Summary: The G20 has become the de facto global forum (rather than the IMF) for managing currency issues.

Part III: The Next Global Crisis

Chapter 8: Globalization and State Capital

Summary: Globalization increases the interconnection (and fragility) of international markets while state capital is a growing tool for countries like China and Russia to exert influence in capital markets, which are becoming an increasingly important realm of national security.

Chapter 9: The Misuse of Economics

Summary: The shortcomings of the Fed, monetarism (MV = Py), Keynesianism multiplier, and the rise of behavioral economics.

Chapter 10: Currencies, Capital, and Complexity

Summary: Behavioral economics, complexity theory (cf Mandelbrot), and money=energy theories of market dynamics.

Chapter 11: Endgame—Paper, Gold, or Chaos?

Summary: The path of the dollar is unsustainable and the dollar will likely be one of multiple reserve currencies, subordinated to SDRs, be restored with a new gold standard, or descend into chaos.