Author says currency wars could crash the dollar...

[VoluntaryAmerican]

My co-worker knows this guy. She graduated from high school with him.

[Paul Or Nothing II]

This hypothetical scenario, he admits, is not inevitable. A gradual move away from the dollar as the dominant global reserve currency has the potential to bring about a softer landing, as does the growth in use of the Special Drawing Rights, an existing medium of exchange between nations issued by the International Monetary Fund. Still, the best way to ensure financial stability, he argues, would be the adoption of a "flexible gold standard," in which major currencies are linked to the price of gold, as they were in past periods of global economic calm: prior to World War I and in the two decades following World War II.

Why have these useless "currencies"? Just let people use whatever they want as money & measure them in the terms that they want rather than imposing some useless names like "dollar", "pound" or whatever, I think if competing currencies are allowed then most people will choose gold & silver so let people have them denominate them in grams or ounces rather than "dollar" or whatever

Yeah that's the real problem with him isn't? He wants a certain form, he's not saying I want the market to choose, no, he says "I think this form would be best". He has a pretense of knowledge no man can have and that's why I said don't fall for it. He knows a lot about what's happening but he doesn't share our beliefs.

That is true, government-controlled gold-standard should be a complete no-no

What do you mean he doesn't share our beliefs? I've read the book and interviewed Rickards. He wants a return to the gold standard.

I don't know but competing-currencies would be the way to go otherwise we'd only get back to same old, same old, govenment fixes $x = Gy then creates more money than they've gold & then "revalue" (DEVALUE) the currency as $x = Gz & so on, it's not a "gold-standard" per se but a phony government-controlled version of it

Rickards is a pretty sharp analyst. His observations on the Fed, monetary policy and macro economic events can be insightful and thought provoking. I tried several times to ask him (via twitter) what he thinks about HR 1098, but I never got any response out of him.

I won't be surprised if you never get a response

One thing he said in the interview I listened to was that two weeks ago the US started a currency war with Iran, that we have stopped the flow of dollars to their central bank. He said their prices have gone up 40% in the past two weeks and that dollars were in very short supply, and that Iranians were going to Iraq to trade dinars for dollars to take them back to Iran. I remember about the same time that the news was that Iran would be accepting gold instead of dollars in their trade with India...which doesn't really make much sense..Seems like they'd rather have the dollars.

I guess I'm confused.

Anyone?

I think it's the other way around, Iran has dumped the US dollar & has been organizing for oil-trade with Russia in Rubles & with Japan in Yen & in gold with India & China hence all the hysteria - "oh, they've got the nukes, let's have a war with them!" because it would knock dollar off its economic pedestal

Seen this thread on currency wars and I wondered about the Petrodollar theory. My basic understanding of this is that the United States has to remain pretty much in a perpetual state of war with other nations to protect the dollar and make sure OPEC nations in particular trade their oil in USD ONLY.

So for instance: The Fed prints up some cash and loans out at interest, that money is then used by US citizens and businesses to purchase CHEAP goods and services from other nations, such as China or India. These nations, having traded their goods for dollars then use those dollars to buy crude from Saudi Arabia, Saudi then buy US Treasury Bonds with those dollars. So completing the cycle and ultimately returning those dollars to the US/Fed...

Now that's all very well, until a country or group of countries can persuade an oil producing nation to trade in some other currency, say gold, or Japanese Yen. This Breaks the cycle of the petrodollar. Its rumoured that Saddam Hussein had decided to begin trading his oil in Euro-dollars and that was perhaps the reasoning behind the Bush administration's war agenda with Iraq..Think about it. If the world suddenly stopped trading oil in dollars then all those millions and millions of dollars laying in the bank vaults of countries all across the globe would become practically worthless overnight and send the United States economy into hyper-inflation.. There are some very good documentries on Youtube that seem to back this up..

Well said, except I'd just like to chime in by saying that the interest earned by Fed goes to Treasury/US-government as Fed hands over its "profits" to the US government (which includes interest on Treasuries & interest on loans given to financial institutions, etc)

Have you ever actually read Currency Wars? The last chapter, quite literally, is his "What is to be Done" chapter. Sounds like you're just flaming without knowing what you're talking about.

The guy adores Hayek and considers himself to be contributing to the Austrian tradition.

The only issue I think "we" (and I use this term loosely because we all don't agree with one another) might disagree on is that Rickards believes all derivates trading should be banned. He does present a decent argument for it, though.

Well, if he indeed believes in banning all derivatives then he DEFINITELY isn't "one of us" because "we" believe in freedom of life, liberty & property to every person which means if people consensually engage in any activity so long as they don't violate someone else's rights

If he indeed believes in banning all derivatives then I'm afraid he doesn't know that much economics afterall, derivatives are essential part of the markets & risk-management as well as price-discovery, all of which are very important functions to be served under a sound economic system

Please look for the thread regarding derivatives, I believe we had a nice & informative discussion about it in the last couple of weeks so the thread must be on one of the recent pages in this section

Well, in all fairness, you can have a well-run fiat currency. You can even have deflation with a fiat currency. It just never seems to happen, does it?

NO, you can't have "well-run fiat" because central-planning does NOT work because nobody has all the information required to dictate price of anything & YES, managing the moneysupply essentially means dictating it's "price" or "purchasing-power" (things that you can get in return for something over a period of time for fixed quantity) or whatever you want to call it

Moreover, there's always the fact that people are self-interested which means that those who run this system will try to exploit it to benefit themselves & those who benefit them; this is the same "problem of right people" faced by communists/socialists as the supposedly kind, angelic, omniscient people that would run the system "just right".....can't be found & rather those who want to exploit it are automatically attracted it

Any monetary system that depends on the "discretion" of a handful of all-wise angels will necessarily fail

You can't have free market currency without abolishing taxes. Whatever payment the government demands for the tax bill is what the government currency will be.

Yes, taxes should be abolished while so far as taxes go, there can always be currency-conversion, for example, one can always convert one's gold into FRNs & pay off the government with that

Going a step further (& of course, it will be while before this becomes feasible) & say there should be no "taxes", government must EARN its money like everyone else by providing a good service rather than just being able to ROB people; until they can just TAKE the money, they'll have little incentive to provide good service, that's how markets work, if businesses could just take our money then they wouldn't be so bothered about their goods & services & government IS such a "business" & that needs to change if we're to expect real accountability from the government

[Blueskies]

Well, if he indeed believes in banning all derivatives then he DEFINITELY isn't "one of us" because "we" believe in freedom of life, liberty & property to every person which means if people consensually engage in any activity so long as they don't violate someone else's rights

If he indeed believes in banning all derivatives then I'm afraid he doesn't know that much economics afterall, derivatives are essential part of the markets & risk-management as well as price-discovery, all of which are very important functions to be served under a sound economic system

Please look for the thread regarding derivatives, I believe we had a nice & informative discussion about it in the last couple of weeks so the thread must be on one of the recent pages in this section

There are a lot of Austrian-minded economists that are extremely skeptical of derivatives. Taleb comes to mind, as do the folks at ZH--although I don't think they've gone as far as saying that they should be outright banned.

The crux of the anti-derivatives argument is like this: they are extremely complex instruments and virtually everyone trading them doesn't understand them. They are fraudulent by nature, and can put economic agents at risk that aren't even involved in the trade.

Yes, taxes should be abolished while so far as taxes go, there can always be currency-conversion, for example, one can always convert one's gold into FRNs & pay off the government with that

Going a step further (& of course, it will be while before this becomes feasible) & say there should be no "taxes", government must EARN its money like everyone else by providing a good service rather than just being able to ROB people; until they can just TAKE the money, they'll have little incentive to provide good service, that's how markets work, if businesses could just take our money then they wouldn't be so bothered about their goods & services & government IS such a "business" & that needs to change if we're to expect real accountability from the government

If you have a government that runs like a business, then you don't have a government at all.

You cannot have truly competing currencies with a government that levies compulsory taxes. Can't do it. Sorry. The equivalent of dividing by zero.

Even if you can convert whatever currency you're using into FRNs to the pay the taxes, the FRNs themselves are still the de facto official currency. The US dollar would not be the currency if it wasn't for the fact that you are legally obligated to pay your taxes in dollars. The taxes create the demand for the dollars in the first place.

The idea of competing currencies can only truly make sense in a stateless society. And we aren't there yet. In the meantime I'll take a government gold standard over Bernanke's printing press. Worked pretty well for the first 130 or so years of this country's existence.