The Death of Money | James Rickards

Summary of: The Death of Money: The Coming Collapse of the International Monetary System
By: James Rickards

Introduction

In ‘The Death of Money: The Coming Collapse of the International Monetary System’, author James Rickards reveals how modern currencies have shifted from possessing intrinsic value to relying on government-backed fiat money. The book delves into the challenges faced by the global economy, such as financial warfare, and how countries like China, the U.S., and the Eurozone have contributed to looming crises threatening the world’s monetary system. Rickards also explores the growing distrust in traditional currencies, the potential benefits of reintroducing the gold standard, and how individuals can safeguard themselves in an unstable financial landscape.

The Rise of Fiat Money

In today’s economy, fiat money is the norm – paper money or coins that lack intrinsic value but are accepted as a means of payment because of government backing. Prior to 1972, the global economy was based on the gold standard, where the value of currencies was linked to the price of gold. However, after the financial crisis of 1973, governments lost their confidence in the ability of the US to maintain the fixed rate between dollars and gold, leading to the creation of fiat money. Today, the global economy based on floating currencies is facing new challenges.

The Power of Financial Warfare

The aftermath of the 9/11 attacks highlighted the potential of financial warfare as a strategy used by criminals and states to attack their enemies or profit. Financial warfare can be either offensive or defensive in nature. An example of offensive financial warfare occurred in 2012 when the US excluded Iran from the global payments system, causing the Iranian currency to depreciate. Iran defended itself by buying up gold in bulk. The financial crisis of 2008 also demonstrated the potential seriousness of financial warfare, and as a result, the US and China have now developed procedures for financial warfare alongside their traditional military forces. The global economic system is fragile and vulnerable to such attacks, with even small terrorist or criminal groups having the potential to cause significant damage on society.

Looming Financial Crises

Despite the passage of five years since the global financial crisis, the world economic condition still faces potential challenges. This book summary highlights two possible crises that could threaten the global economy. The first is the housing bubble in China, where investment has been misplaced due to corruption plaguing the government. The second crisis is brewing within the US, involving the formation of a student loan bubble. As politicians continue to encourage students to take on more loans to boost consumption, the inability of graduates to find jobs means that a massive loan default could happen in the near future, triggering another global financial meltdown. Knowing about these two crises can help readers make more informed financial decisions.

The Fragility of the World Reserve Currency

Are we ready to say goodbye to the US dollar as the world’s reserve currency? The global financial system is built on trust in its reliability, but recent developments, including the dissatisfaction of the BRICS countries, OPEC states, and the strengthening euro, have threatened its stability. The US presidency’s domestic fiscal policy could also adversely affect the dollar’s status. Perhaps it’s time to consider a new global currency system.

The National Debt Dilemma

The US national debt has grown larger than the economy, and politicians have two solutions: strengthen the economy or encourage inflation. While strengthening the economy is the sensible way to tackle the issue, it is not always easy to implement. On the other hand, inflation is the more popular but problematic solution. Quantitative easing, which involves printing more money, increases inflation by giving people more money to spend, driving up prices. However, this method has not been effective in reducing the national debt. Deflationary pressures from cheaper labor and energy costs in developing countries disrupt its effectiveness.

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