CM-4 – The Death of Money: The Coming Collapse of the International Monetary System (book by James Rickards) (Chaos Monitaur)

In this excellent follow-up to his first book Currency Wars, James Rickards presents an interesting and informative analysis of one of the gravest threats to our financial stability. The Death of Money is not a warning about just another economic crash or another financial crisis; instead, it’s about the total collapse of the international monetary system (of which the US dollar is the reserve currency). The effects will be greater and more widespread than those of any simple (and regularly occurring) crash.   

Reasons for Pessimism 

The system is already fragile, and becoming increasingly so. There are several factors that come into play.    

1. First, the US dollar’s time as the global reserve currency is about to end. Various countries have already started abandoning the dollar, and that trend will only continue.   
2. Second, there is an excess of debt across the world. In fact, US debt just exceeded the $20 trillion mark, and if you think that aint excessive, try counting that high.    
3. Third, the motivations and behavior of the bankers and economists in charge of our money are dubious and in fact sinister, and their incompetence has only exacerbated the crisis. The quantitative easing (QE) money-printing programs have already weakened the dollar, the euro, and the yen, and this will cause holders of those fiat currencies to abandon them in favor of alternatives such as precious metals and cryptocurrencies.   

3 Possible Outcomes 

In response to the above threats, Rickards outlines three possible outcomes.   

1. First, the IMF’s Special Drawing Rights (SDRs) could be adopted for use as the global reserve currency.   
2. Second, we could revert to a gold standard. (Many observers will note that China is already working towards backing the yuan with gold in the foreseeable future, and has been acquiring more and more gold over the past few years.)   
3. Third, we get chaos. Rickards believes that if neither of the above options pans out, we will experience social unrest, which may even descend into utter chaos. And that will result in more horrific and longer lasting effects for all of us.   

The Lesser of 3 Evils. Inflation, Deflation, or Neither? 

The Federal Reserve is in a no-win situation. It’s trying to foster inflation (needed in order to make it easier to pay off the excess debt), while trying to keep interest rates low so that the debt remains manageable. At the same time, asset prices are already over-inflated, so deflation is necessary (in order to reduce the price of assets to more realistic, reasonable, and competitive levels). Currently, we have neither sufficient inflation nor sufficient deflation, and no one (Rickards included) knows which one we will eventually get. Of course, the current “balance” makes it appear as if the situation is stable. It’s not. Eventually, we will get either inflation or deflation, and whichever one we get will eventually become uncontrollable.   

Real Money

The renewed demand for gold and the rise of cryptocurrencies indicate that the hegemony of the US dollar and other fiat currencies is coming to an end. While Rickards realizes that SDRs can be an effective replacement for the dollar as a global reserve currency, he clearly favors gold and considers it to be the only “real money.”   

Systemic Crisis 

The many issues with the current system stem from the fact that we are not simply at the bottom swing of a boom-bust cycle. If this were nothing more than a typical recession in a typical cycle, the economy would have recovered from the 2008 crash, and all would be well by now. But no, the problems are systemic and structural. And since the powers-that-be fail to realize that what we are dealing with is not a typical recession, they are unable to respond properly to the situation. Their economic models no longer apply, and there’s nothing they can do.     Be afraid, and be prepared.   

(Further Viewing) – Animated Book Summary