Currency Wars_ The Making of the Next Global Crisis - James Rickards [117]
At that point society has three choices: simplification, conquest or collapse. Simplification is a voluntary effort to descale society and return the input-output ratio to a more sustainable and productive level. An example of contemporary systemic simplification would be to devolve political power and economic resources from Washington, D.C., to the fifty states under a reinvigorated federal system. Conquest is the effort to take resources from neighbors by force in order to provide new inputs. Currency wars are just an attempt at conquest without violence. Collapse is a sudden, involuntary and chaotic form of simplification.
Is Washington the New Rome? Have Washington and other sovereigns gone so far down the road of higher taxes, more regulation, more bureaucracy and self-interested behavior that social inputs produce negative returns? Are certain business, financial and institutional elites so linked to government that they are aligned in the receipt of outsized tribute for negative social utility? Are so-called markets now so distorted by manipulation, intervention and bailouts that they no longer offer reliable price signals for the allocation of resources? Are the parties most responsible for distorting the price signals also those receiving the misallocated resources? When the barbarians arrive next time, in whatever form, what is the payoff for resistance by average citizens compared to allowing the collapse to proceed and letting the elites fend for themselves?
History and complexity theory suggest that these questions are not ideological. Instead they are analytic questions whose relevance is borne out by the experience of scores of civilizations over five millennia and the study of ten billion years of increasing complexity in nature. Science and history have provided a complete framework using energy, money and complexity to understand the risks of a dollar collapse in the midst of a currency war.
What is most important is that the systems of immediate concern—currencies, capital markets and derivatives—are social inventions and therefore can be changed by society. The worst-case dynamics are daunting, but they are not inevitable. It is not too late to step back from the brink of collapse and restore some margin of safety in the global dollar-based monetary system. Unfortunately, the deck is stacked against commonsense solutions by the elites who control the system and feed at the trough of complexity. Diminishing marginal returns are bad for society, but they feel great for those on the receiving end of the inputs—at least until the inputs run dry. Today, the financial resources being extracted from society and directed toward elites take the form of taxes, bailout costs, mortgage frauds, usurious consumer rates and fees, deceptive derivatives and bonuses. As citizens are crushed under the weight of this rent extraction, collapse grows more likely. Finance must be returned to its proper role as the facilitator of commerce rather than a grotesque end in itself. Complexity theory points the way to safety through simplified and smaller-sized institutions. Incredibly, Treasury Secretary Geithner and the White House are actively facilitating a larger-scale and more concentrated banking industry, including a protoglobal central bank housed at the IMF. Any success in this endeavor will simply hasten the dollar’s dénouement.
CHAPTER 11
Endgame—Paper, Gold or Chaos?
“I just want to make it clear to everybody that our policy has been and will always be . . . that a strong dollar is in our interest as a country, and we will never embrace a strategy of trying to weaken our currency to gain economic advantage at the expense of our trading partners.”
U.S. Treasury Secretary Timothy F. Geithner, April 26, 2011
“No, they cannot touch me for coining, I am the king himself.”
William Shakespeare, King Lear
Few economists or policy makers at the IMF or global central banks would subscribe to the complexity-based, money-as-energy model outlined in the previous chapter. Although