Introduction
Currency Wars, published in 2011 in the aftermath of the Great Financial Meltdown, contends that the competitive weakening of currencies is a serious national security issue. The Federal Reserve began a currency war by implementing quantitative easing in 2008, subjecting the dollar to a major collapse (Rickards, 2011). The author contends that this blunder was caused by a dependence on antiquated socioeconomic theories of thought that do not comprehend the complexities of modern capitalism as well as currency markets (Rickards, 2011). Without a reconsideration and a reversion to basic monetary principles, the result might be a severe financial disaster.
Empirical Accuracy
There were major gaps at some point that pushed some countries to devalue their currency. As noted by CNBC, in 2019, the central banks of the United States, the Bank of England, and the European Union were engaged in a ‘secret currency war’ (Smith, 2019). With interest rates at their lowest, currency devaluation was the only weapon the central banks had to stimulate their economies.
Rickards introduced his show with a page-turning description of a war game waged in the depths of the Pentagon. His book is built on solid research and analysis, drawing from his extensive experience working in government agencies like the US Treasury Department and consulting firms like Chatham House (Rickards, 2011). His writing style is accessible and engaging, making this a great read for anyone interested in learning more about how global economies work or why they’re changing so rapidly.
The book contains many valuable insights into contemporary issues facing the world economy today, from China’s rise as an economic superpower to America’s ongoing recovery from recession but it also emphasizes that there are no easy solutions for these challenges; instead, we must take steps toward greater cooperation among nations if we hope to succeed in our efforts at financial cooperation with each other.
Omissions on the Part of the Author
This book is extremely well-written and has a lot of interesting information about the way currency works today. But there are a few things that I found missing: firstly, there is no discussion of how money works in general; secondly, there is no discussion of how this will affect politics as we know them today; thirdly, there was no mention of any other countries besides America and China specifically being involved with this new world order.
Engagement with R Theory
The argument made by the author is theoretically informed. Rickards (2011) provides an overview of historical examples of currency wars, including many past examples where countries have gone to war over currency issues. He also explains how they can be avoided through international cooperation (Rickards, 2011). The author does not engage with R theory in any depth. At the same time, he does mention that the book was inspired by a conversation with economist John Maynard Keynes about the possibility for conflict between different nations’ currencies (Rickards, 2011). However, there are no references to specific theories or models used in this book beyond some general references to economists such as Adam Smith and David Ricardo who wrote about economic models centuries ago.
Support of Main Thesis
The main argument in Currency Wars is that the United States has become overly reliant on China for its trade and investment needs, which has resulted in an imbalance between the two countries’ economies (Rickards, 2011). While it is clear that this issue has been brewing for some time now, the U.S. dollar’s depreciation since 2008 is proof enough. Rickards (2011) goes further to identify why this problem exists and why it is so difficult to fix. He makes his case through a series of case studies and anecdotes from those who have experienced firsthand the effects of this imbalance firsthand: Asian business leaders who have felt pressure from their American counterparts to lower their tariffs; Chinese officials who feel threatened by these tariffs; Americans who wonder whether they will ever be able to compete with China at all; and even Chinese citizens who fear a currency war might destroy their lives as they know them today.
Furthermore, China plays an important role in the currency crisis. It keeps the majority of its foreign currency reserves in The US Treasury securities, bills, and notes (Rickards, 2011). However, China is concerned that United States would depreciate its Yuan by inflation, devaluing such holdings. Rickards (2011) contends that China might sell these holdings, causing US rates of interest to skyrocket and the USD to collapse. Of course, this would have disastrous consequences for homes (Rickards, 2011, p. 12). Indeed, China has already been diversifying its foreign exchange reserves and going into commodities, which bodes ill for the USD in the future.
Comment on Findings
In Currency Wars, James Rickards (2011) provides a fascinating analysis of how the world’s economic system has changed over the past several decades. He argues that in order to understand this change and its implications, we must look beyond just the mechanics of money flows and trade (Rickards, 2011). We must consider the political and cultural forces that have driven the success or failure of particular countries’ economies.
The author is certainly correct in his assessment that international politics has become more volatile since the end of World War II. The rise of new technologies like cryptocurrencies and blockchain technology means that many nations’ currencies are now at risk of losing value due to global competition for investments and talent (Rickards, 2011). This trend will only continue as more countries seek to make themselves attractive places for foreign direct investment (FDI). Rickards (2011) also points out that many countries have responded by adopting policies designed to attract FDI or protect their own industries from outside competition. However he argues these efforts will ultimately fail if they are not backed up by effective economic management strategies.
How and Why the Thesis Would be Argued Better
The book is filled with many interesting points, but it also has some flaws. One of the main problems that I found was that all of the arguments made in the book were explained in a way that was very complicated. This can make it difficult to understand what exactly is being said, and to follow along with it. Another problem I had was that most of the evidence provided was anecdotal or circumstantial rather than hard data, which makes it difficult to judge whether or not something is true or not. While all of these problems are understandable, given the subject matter, they still make it hard for me to evaluate this text as a whole.
The author uses his background as an investment banker to illustrate how countries around the world are reacting to the United States increasing involvement in global affairs and how they may be able to take advantage of this situation. Rickards (2011) argues that while other countries have been able to strengthen their position by working together with other countries and using their own strengths, America has been left behind in this race for power.
Conclusion
In conclusion, the author believes that a serious financial collapse is the most likely conclusion owing to the political and socioeconomic balance we face. This would almost certainly be characterized by financial market panic, which would almost certainly result in considerable government involvement. This action, ironically, would certainly intensify the economic circumstances that generated the upheaval during the initial place.
References
Rickards, J. (2011). Currency wars: The making of the next global crisis. Portfolio / Penguin.
Smith, E. (2019). ‘We are in a currency war, but nobody has admitted it,’ strategist says. CNBC. Web.