In 1971 President Nixon imposed national price controls and took the United States off the
gold standard an extreme measure intended to end an ongoing currency war that had destroyed
faith in the U.S. dollar. Today we are engaged in a new currency war and this time the
consequences will be far worse than those that confronted Nixon. Currency wars are one of the
most destructive and feared outcomes in international economics. At best they offer the sorry
spectacle of countries' stealing growth from their trading partners. At worst they degenerate
into sequential bouts of inflation recession retaliation and sometimes actual violence. Left
unchecked the next currency war could lead to a crisis worse than the panic of 2008. Currency
wars have happened before-twice in the last century alone-and they always end badly. Time and
again paper currencies have collapsed assets have been frozen gold has been confiscated and
capital controls have been imposed. And the next crash is overdue. Recent headlines about the
debasement of the dollar bailouts in Greece and Ireland and Chinese currency manipulation are
all indicators of the growing conflict. As James Rickards argues in Currency Wars this is
more than just a concern for economists and investors. The United States is facing serious
threats to its national security from clandestine gold purchases by China to the hidden
agendas of sovereign wealth funds. Greater than any single threat is the very real danger of
the collapse of the dollar itself. Baffling to many observers is the rank failure of economists
to foresee or prevent the economic catastrophes of recent years. Not only have their theories
failed to prevent calamity they are making the currency wars worse. The U. S. Federal Reserve
has engaged in the greatest gamble in the history of finance a sustained effort to stimulate
the economy by printing money on a trillion-dollar scale. Its solutions present hidden new
dangers while resolving none of the current dilemmas. While the outcome of the new currency war
is not yet certain some version of the worst-case scenario is almost inevitable if U.S. and
world economic leaders fail to learn from the mistakes of their predecessors. Rickards
untangles the web of failed paradigms wishful thinking and arrogance driving current public
policy and points the way toward a more informed and effective course of action.
