The Death of Money by James Rickards [Book Summary – Review]

Do you recall the 2008 financial crisis? That the most unfavorable is now over and the globe is looking further to a time of advancement, welfare, and felicitousness?

If your answer is yes, be ready to be surprised.

The thing that is truly incredibly fragile is today’s financial structure where the cash you have in hand isn’t unique. Besides, the following depression seems coming on its way.

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Chapter 1 – No present currency has its value and is just guaranteed by the state that they have a value.

Some hundred years ago, when you desired to purchase some bread from an oven, you needed to give the value of the bread in silver or gold. These days, on the other hand, you can pay a banknote that is just paper that has no value. Therefore, what was the reason that the owner of the oven takes this paper as his labor?

The reason for it is that the state values ​​paper. This phenomenon is valid to all contemporary money and is named fiat money, in which the word “fiat” comes from Latin and this means to allow it to be made.

It is fundamentally an agreement between the exploiters of it and the government. By the government, a promise was given to the owner of the oven that he could trade the bill for other valuable things such as salt or flour. Once they were not supposed to have any real value like gold coins if everybody was sure that they were giving the banknotes this default external value.

The disconnection between money and real valuables emerged in 1972. Before that time, the economy worldwide was based on the norm of gold that the government of the US committed to fixing the worth of the currency of the US dollar according to the price of gold. An oz gold costs $35. Later, by other countries, the exchange values were fixed in dollars so basically, every currency was tied to the value of gold.

However, following the 1973 financial crisis, those who lost faith in the US’s skill to keep the stable ratio between dollar and gold were governments around the globe. The US understood that it must break from gold and allow its money, and thus, all other currencies, to float freely.

From this point on, not each currency had tangible worth and could only be affected by the government’s monetary policy.

However, today, what is under attack is the contemporary economy worldwide depended on independently fluctuating money. It will be taught to us why in the following chapters.

Chapter 2 – It is a financial war that can take a heavy toll on the delicate worldwide monetary structure.

At the time the 9/11 aggressions were carried out by terrorists, they did not only hit human beings in Washington D.C. and New York. Also, the economy of the US was targeted by them.

The way of this?

During the months before the attacks, big bets were made by them on the stocks of airlines that fell with the aggression. When stock prices dropped, terrorists made huge profits. That was an instance of monetary fight, progressively utilized tactic by convicts to make profits and by officials to assault their rivals.

That can be aggressive or protective is financial prosperity.

Aggressive financial war could mean, for instance, entering a foreign stock market to cheat with costs and therefore cause economic harm.

An actual instance happened in 2012 at the time Iran was attacked by removing it from the global payments transfer system. Consequently, Iran was no longer able to exchange its money for the dollar or euro, causing the Iranian money to decrease as it turned out unwanted for utilization in commerce.

Vindicatory fiscal prosperity is used to preserve stock exchanges or to fight back against attacking states.

For instance, Iran protected their country by collectively purchasing gold months before the American attack. In this way, it can continue to do business although they were removed from the worldwide purchasing structure.

It was the possible severity of the financial war as evidenced by the 2008 financial crisis. If poor hypothecs accidentally caused $60 trillion in economic harm, consider the extent to specialists who grasped the monetary structure and intentionally played with that hurt it. Since the worldwide monetary structure is too brittle and unguarded to assaults like these, the whole community can be harmed even by minor terrorists or convict teams.

Having arrived at this reality after the monetary depression, America and China now improved methods for monetary prosperity alongside their conventional military forces.

Chapter 3 – They are the grains of a future crisis within the financial system.

More than five years have passed after the monetary depression, therefore you might think that what could be the worst has passed and the future will be very active.

Sadly, the future may not be so pink: some possible depressions can still be hidden in the monetary structure.

Such a potential crisis is due to the poor planning of this growth, even though the economy of China has boosted a lot in the past decade. Because of the great corruption in the ruling Communist Party, a lot of investment is put in the false fields of the community.

An instance is a lot of abandoned towns across the country: large deserted urban spaces with structures, playgrounds, and roadways that nobody could use. They were built because of the strategy of the government of beginning and promoting investment in larger projects, regardless of if it is requested, considering the final result.

Sadly, this strategy has developed a capital balloon and could soon explode when investors realize that they are not having any yield from the investment. As investors from all over the globe pour money into China and therefore these meaningless projects, a boom in the market of China could place the entire economy worldwide at risk of downfall.

Another potentially impending depression could be discovered in the USA. Although the hypothec depression has ended, another bubble is rapidly forming in the field of the debts of students this time around.

Why is that?

Because whenever it is wanted to invest money by politicians for an economy to excite consumption, they select offering more debts for students. It is politicians who grasp that they can trust students to waste cash in the market.

Now, more than $1 trillion has been provided to student loans by the officials of America and some financial institutions. Sadly, students cannot find jobs after graduation as American financial conditions are still stagnant. What happens is that the students would not be able to repay the student debts and would most likely default in the short term. What could en masse disarray American homes and financial markets, is such a default?

Chapter 4 – It is the American dollar, whose global dominance as the base money is coming to a finish.

Did you visit a country that has a low local currency, for example in Africa or Asia? If your answer is yes, you might discern that people in those regions are likely to admit American dollars happily in stores and stands.

They are also delighted since the American dollar has been the globe’s reserve currency: almost all states have large reserves to use in international transactions such as trade. Consequently, due to it being perceived as trustworthy and consistent money, human beings in certain places like it better than their currency. The entire monetary structure worldwide rests on dollars – the major currency for trade.

Still, developments in the near previous years made some states question their trust in the dollar. The reason for this is that improving economies such as the BRICS countries (India, South Africa, China, Russia, and Brazil) are unhappy with their economies being so directly impacted by monetary resources, as most of the trade is in US dollars. the strategy of an external force – United States.

OPEC countries are another group that supports the change. Conventionally, they, particularly Saudi Arabia, were delighted to double the oil commerce in US dollars with the US security promises, in answer to. Lately, however, the United States has gradually reestablished relations with Iran, the sworn enemy of the Saudis, prompting the Saudis to seek other ways out to American companionship and over-trust the dollar.

In addition to the groups we have mentioned, the euro that has been getting stronger puts coercion on the dollar- rested on the financial structure worldwide. It may appear counterintuitive as the Eurozone is experiencing a financial depression, however, in reality, the depression and the powerful economy of Germany have forced the Eurozone into a much more stable, more powerful, and more ambitious economy than America. This might be the correct time to think that the euro will play a bigger role in the future financial structure worldwide.

Chapter 5 – Until now, by the US, its huge national debt has been tried to finish through inflation.

When you follow the recent news, you would presumably discern that they talk a lot about the enormous size of the US federal liability. For an observable way: the initial time after the end of World War II, the federal liability grew faster than the whole economy of America. As a result, the political discussion concentrated on ways to reduce this debt.

Two major steps exist to do this.

Common sense and the logical way are to boost and advance the economy. The way to do this is by funding improvement of infrastructure such as freight and communication structures that stimulate economic growth. Sadly, selling to voters is a difficult step and it is difficult to sense which investments will be made.

By politicians, a politically simpler, however, financially harder technique was preferred: promoting inflation, thus decreasing the value of the dollar and removing debt. To comprehend the meaning of this, think of the next instance:

If $100 was borrowed by the American government and there was no inflation, that debt would still be valued at $100 in a year. However, if inflation continues being ten percent, a year later the debt would just be worth $90.

American government adopted the technique of pressing more money and releasing those to the economy to raise inflation. This technique is called quantitative relief and results in human beings owning more cash to waste, which raises prices. To comprehend the extent of this pressing process, imagine a record rate of USD 1,000,000,000,000 in a year.

Then, what’s the issue?

The reason until now, the technique has not worked is that the dollar has also been subjected to causes of deflation, trying to raise its worth.

For instance, the worth of energy in America is falling with the use of natural gas. Moreover, prices of the labor force are falling as inexpensive labor from many improving countries enter the market.

These causes of deflation prevent America from achieving aimed inflation rates and consequently, debt keeps going to arise.

Chapter 6 – Due to the US efforts to raise inflation, human beings have been directed to seek other currencies.

The previous section has mentioned the ways the American government tries to deal with its huge debt by printing more money by you.

Sadly, this tactic corrodes human beings’ trust in the American dollar.

The reason for that?

Because an illusion of money is created by printing more cash: even though you may consider the growth is improving, it doesn’t increase the financial system or turn it into being more salutary for the moment. For the longer term, the value of the money is decreasing slighter and slighter, eroding people’s and investors’ savings and thus reducing their trust in the American dollar.

What is also true for the dollar-foundation financial structure worldwide and is already detectable in establishing spending options to hard cash is this loss of trust.

A current trend towards electronic money like Bitcoin is another notable example. This digital money is not connected to any official or bank. By the end of 2013, more than seven billion dollars of bitcoins existed in the stream. While this money’s long-term viability remains uncertain, its popularity suggests that individuals are hopeless for options to cash.

A different exciting novel development is an electronic exchange: online merchandise trading with no cash in between. For instance, China Railway once bought heaps of iced turkey from a supplier of theirs and then exchanged those with General Electric with locomotives. General Electric later traded those turkeys for cash with Chinese Tyson Food, but the cash remained unchanged on the real agreement.

Chapter 7 – It is truly a global currency, rather than the dollar that the global monetary system requirements.

So far, it was seen what is in trouble is today’s dollar-founded worldwide monetary structure. What could be arranged about this?

Turning to the IMF could be one option since its role is to loan money to countries in desperate need of financial backup. For lending, they utilize their quasi currency, SDR.

Even though formally not a currency, SDR works similarly: its worth is extracted from the globe’s main medium of exchange, could be exchanged among nations, and switched for the other medium of exchange.

Since SDR works similarly to a currency and since it is steadier than USD, there is a potential to change USD as global backup money. America and the IMF discussed slow action on this path.

This change will take certain advantages, most importantly, that the financial strategy about SDR will come from the IMF, a global institution that will decide depending on what is beneficial for the whole globe. Today America sets its financial strategy for USD according to its concerns country-wise, which sometimes harms other states financially.

It appears like the entire globe, involving America, is concerned about observing SDR and the IMF take a bigger part in the financial structure worldwide. To sum up, a poor financial structure is in nobody’s interest because it is unsteady and unpredictable.

Chapter 8 – It is the reintroduction of the norm of gold that will level out the worldwide currency system.

It is said by Warren Buffett, a fabled investment specialist, that “Gold is for losers”. In fact, in the last some ten years, the financial structure worldwide has progressively been far from being worth of gold.

Still, if the aim is to establish a steady financial structure, we need to think of taking gold again into the system.

The reason for that?

Because what will present a consistent landmark – an anchor – that their worth is to bound currencies. Right now, for instance, the dollar is not supported by anything durable, just the commitment of American officials and the federal bank that it is worthy.

This system is called the “Ph.D. standard” by one finance writer: it is the value of the dollar that depends solely on the steps of picked Ivy League alumni who set policy.

Well sure, the normal of gold cannot be rigorously reapplied – it requires attentive organizing and thinking.

How to set the value of gold correctly will be a major concern. The present price of USD 1500 for each ounce cannot be used because all the gold worldwide at this price will not be adequate to support the value for the supply of two point five trillion USD worldwide. Therefore, central banks will have to set a fresh price, close to USD 17500 an ounce, to meet the supply of finance of America, China, the European Union, and Japan

It appears distant that the sole possession of jewelry such as gold, rings, and bracelets may be the rescuer of our worldwide financial structure.

Chapter 9 – Distribute your fortune across multiple entities to guard it in case hyperinflation strikes.

If you were living in Germany during the 1920s, you might see a foreign sight: Someone purchases bread and pays with a cart full of cash.

It was this strange situation caused by uncontrolled inflation, i.e. hyperinflation: charges were escalating so fast that cash was essentially worthless. Well sure, this type of condition is indefensible and in such a case guides public unrest and ultimately the people to turn towards Adolf Hitler.

Sadly, today’s condition seems to be a question of timing before the dollar enters hyperinflation. When you face this dire situation, you must take measures to keep yourself alive and thrive in the worst case.

How can be that done by you?

To be sure that your fortune is put on a wide blend of capitals and fields is the easiest measure. If you invest all of your fortunes in a single asset, such as an accumulation bank account at your regional bank, it can all be deleted because of hyperinflation.

Alternatively, you need to have a various investment portfolio:

  • Have gold bullions with 20% of your capital, as their values ​​are relatively stable.
  • With your 20% of capital, buy property at places with a flow of people. Thanks to such properties, the economy will gain value regardless of how far the economy goes.
  • Put 20% of your capital into other monetary tools such as closed-end funds. These are mutual funds that specialize in making a profit at the times that the economy collapses or goes bad.
  • 10 percent is used to purchase fine art such as artworks and carvings. That way, you possess valuable things that are tangible and a little adequate to move with you when required.
  • Finally, 30% of your capital must be kept as banknotes in a bank. Banknotes are the most resilient tool to keep, therefore, when there is a crisis, you can designate it to the smartest looking investment at that moment.
  • It is such various portfolios that would be beneficial for you although there is public disorder and hyperinflation.

The Death of Money: The Coming Collapse of the International Monetary System by James Rickards Book Review

American financial system that corrodes people’s trust in USD and will ultimately cause hyperinflation. We should be ready for such a situation.

Propagate your fortune.

Do you hold your capital in a bank? Then, you might be leaving yourself to more danger than considered, because of hyperinflation, which can destroy the valuation of your capital at any time immediately. It will be much better if you distribute it to various investments such as immovables, gold bullions, etc. You can take help from a regional bank to determine the place and the way.

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