Currency Wars

One of my Christmas gifts from my family was a copy of the book by James Rickards, entitled Currency Wars, The Making of the Next Global Crisis.  It is a national best seller because it is well written.  I found it quite interesting and thought provoking.

Among its strong points is the excellent historical description of previous currency wars, especially those after World War I and World War II.  The author gives his readers a fantastic appreciation of the negative forces unleashed by a currency war.

History is full of financial crises.  The current American administration may be full of smart folks, but they do not have any wisdom.  Hence, I am confident that there will be another financial crisis.

The best book I have ever read on financial crises was written by Dr. Charles Kindleberger, entitled Manias, Panics, and Crashes.  If you only read one book on this topic, read this.

Prior to the creation of The Federal Reserve, when the world suffered a financial crisis it was usually an individual who played the “buyer of last resort” and stepped in to buy financial assets being discounted by the panic, thereby halting the financial crash.

In the 1907 financial panic, J. P. Morgan was the buyer of last resort.  After that event he became convinced that if the United States was to prosper, it could not depend on the wealth of one man to halt a financial panic.  His efforts led to the creation of The Federal Reserve (The Fed).

While the politicians have tasked The Fed twin goals of full employment and low inflation, the real purpose of The Fed is to be the buyer of last resort.  Since its creation, The Fed has worked extremely well, as demonstrated by our 2008 crisis.

However, the substitution of political ideology for wisdom has both burdened the American economy with massive tax increases, enormous uncertainty, disastrous increases in government regulation, and divisive politics instead of leadership.  This toxic brew has left The Fed the only oar in the water trying to move our collective row boat.

Instead of economic stimulus from tax decreases leading to increasing investments and jobs, we are being mugged by the ripple effects of only The Fed with its oar in the water.  Restated, The Fed has been enabling our US government to operate at an amazing deficit with the similar outcome of a wife providing alcohol to an alcoholic husband while saying that she wished her husband would stop being an alcoholic.

However, unsustainable acts continue… until they don’t.  Having witnessed this in a variety of Central and South American countries during my lifetime, the outcome is always the same – rampant inflation and an economic condition called stagflation.  Both are really ugly and the pain of the correction is always enormous.

In his book Currency Wars, James Rickards constantly recommends hard assets, including land, as your best hedge against what he predicts will occur.  Not every tract of land will benefit to the maximum from what is coming.  We believe that our databases enable us to help our clients make the very best decisions to accomplish their goals.  We enjoy helping our clients look brilliant.  Give us a call today!