Rickards Warns of Hyperinflation, Argues for Gold in Currency Wars

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"We're in the midst of an international currency war."
–Guido Mantega, September 2010. Benzinga Radio spoke to Jim Rickards on Tuesday about his new book, Currency Wars: The Making of the Next Global Crisis. The book launched late last week and is currently sitting in the top ten best selling economic books on
Amazon.com
AMZN
. Rickards—Managing Director of Tangent Capital—had much to say about the book and about the future prospects of the US dollar. "There are three parts to the book," Rickards explained. "The first one is called War Games, and it's basically an account of a financial war game that was conducted by the Pentagon in 2009. The second part of the book is history…I write the history of two currency wars of the 20th century. The third part of the book is more analytical…it includes a final chapter that explains where the international monetary system is going." In Currency Wars, Rickards argues that economic conditions in the world have deteriorated to the point wherein major countries have engaged each other in a currency war. This phenomenon is not new—it has occurred twice in the past 100 years alone. When economic growth becomes sluggish, governments will frequently turn to currency devaluation as a method to boost growth. Rather than working towards enlarging the economic pie, nations squabble over the crumbs. As Rickards explains, this occurred previously in the years between the two world wars, and again in the 1970s and 1980s. Unfortunately, currency wars have the possibility of spiraling out of control and frequently lead to unfavorable consequences for all the parties participating. Rickards warns that this current currency war (as he dubs it, Currency War III) has the potential of destroying the US dollar—the edifice the global financial system is built upon. As Chairman Bernanke and the Federal Reserve work to ward of the deflationary pressures generated by the depression that started in 2007, they may inadvertently trigger a flight out of the dollar and a resulting hyperinflation. Under this scenario, Rickards believes that a return to the gold standard may be the best solution. Of course, he is not overly optimistic, and argues that chaos and collapse may be largely unavoidable. Written in a uniquely engaging and intellectual style, Currency Wars is a must-read for any investor interested in global macroeconomics. Readers can listen to the entirety of the interview
here
.
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Posted In: NewsBondsCommoditiesForexTreasuriesGlobalEconomicsMarketsTrading IdeasCurrency WarsJames G Rickards
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