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The Death of Money

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The Death of Money

The Coming Collapse of the International Monetary System

Portfolio,

15 min read
10 take-aways
Audio & text

What's inside?

The International Monetary Fund and China are poised to end the US dollar era. Is America just a crisis away from seeing that happen?


Editorial Rating

7

Recommendation

Portfolio manager James Rickards offers a comprehensive take on the American economy and its place in the world. The picture he paints, although not as tragic as his title suggests, will nonetheless make you fret. His pessimistic but compellingly written ideas about China question its development-miracle narrative, and his enthusiasm for gold places him to the right on some big questions. Critics may note that the dollar has had more staying power than its abuse should probably allow, but Rickards makes his points with conviction and research. The final section of his book is a brave attempt at making tangible predictions and giving investment advice that, unsurprisingly, supports his central themes. getAbstract, which is always neutral politically and which never gives investment advice, suggests Rickards’s treatise to investors who share his concerns over inflation, deflation and the staying power of the US dollar.

Summary

It’s Structural, Not Cyclical

Many politicians and economists want to believe that the future will prove that borrowing and printing money during the Great Recession was a sensible response to the economy’s cyclical problem, but that’s dangerous thinking. When an economy’s troubles are structural and long term, using monetary policies such as quantitative easing (QE) is unwise. Easing or dulling the symptoms of recession with these mechanisms prevents the economy from making the structural adjustments required for its long-term competitive health.

Furthermore, the particular form of these monetary policies is seriously distorting the financial sector and the wider economy. The Federal Reserve increased the money base from $800 billion to more than $4 trillion between 2008 and 2014. This extra money is flowing into asset bubbles in the property and equity markets. Investors are earning low returns due to the greater supply of investment funds coming into the markets, as well as the low baseline set by bond returns. That triggers a search for yield, which subsequently encourages banks and investors back into leverage and into perilous, if innovative practices such as...

About the Author

James Rickards is a portfolio manager at West Shore Group and the author of the bestseller Currency Wars.


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