Over the last few years I’ve come to realize that understanding currency may be the most important challenge facing investors today. In order to build an informed and comprehensive view on what lies ahead, it is instructive to understand the history of money and currencies. Having read many narratives covering the same period, I was incredibly impressed with James Rickard’s ability to distill some of the more salient and often overlooked aspects of how our modern monetary arrangement came to be– and how the lessons of history can provide some insight into how our current system is changing yet again. Importantly, he is able to do so without slipping into some of the mental shortcuts that a less robust historical comparison invites, such as the role of the gold exchange standard during the Great Depression and what that may or many not mean for gold’s role as a monetary asset going forward.
By framing history as a series of “Currency Wars”, Rickards allows the reader to identify commonalities among various historical periods. The trade and budget imbalances, domestic and foreign policy challenges, and fiscal and monetary policy responses all seem to form a rhythmic melody which is layered over the fairly predictable and unsurprising beat of humans responding to incentives (greed) and focused on self-preservation (fear).
I found Rickard’s potentially disjointed discussion of complexity theory to be an unconventional and refreshing way of giving the reader another lens through which the currency system should be viewed– tools which have broad applications in understanding a variety of social, market, and economic forces.
I was disappointed by what I found to be limited use of the notes in providing references to assertions made by the author. But at the same time, unconventional ideas often lack academic support, and well supported assertions often carry similar bents and biases, so it is what it is.
In the end, Rickards arrives at a number of potential outcomes for various monetary relationships, some of which may sound outlandish to our modern mentality of relative currency and price stability, but surely are not radical in the context of the historical record and the many ways in which today’s challenges are larger in scale and more complex than those of the past.