Currency Wars_ The Making of the Next Global Crisis - James Rickards [12]
“Jim, we expect U.S. pushback on our deal with Japan, and frankly we’re tired of the U.S. using its dominant position in the dollar-based trading system to call the shots. There’s a better way. None of our currencies is ready to replace the dollar—we all know that. But gold has always been money good. It’s just a matter of time before the world gets to some kind of gold standard. There’s a huge first-mover advantage here. The first country that moves to gold will have the only currency anyone wants. Here’s our proposal.”
Steve handed me a reworked copy of the mock press release I had given him at the Darien bistro the week before. It was all there: the new gold-based currency, a London bank of issue, the ability to expand the new money supply by depositing gold, the English and Swiss rule of law, clearance and settlement facilities and a true market price. Russia would demand payment in the new currency for natural resource exports going forward. The dollar would be pushed to one side.
“We can do this alone,” Steve continued, “but it works much better with China and maybe others. The more of us who join in, the harder it will be for the U.S. to fight it. You can do the same thing with your manufactured goods that we’re doing with oil and natural gas. Are you with us?”
“Look, let me go back to China and I’ll let you know,” I said. “I’m not authorized to agree to anything; I just came to get the message. We’ll discuss it and I’ll call you with our answer.”
Back in the Chinese capital, my teammates had been diligently working out a response to the scenario we had been presented. The overall sense was to do nothing. The Russia-Japan natural resources deal affected not only those two parties but also Europe, to the extent it might lead to reduced supplies of Russian natural gas. The United States would have to coordinate the response because it was in the best position to pressure Japan. China’s posture would be to keep its head down and let the others work things out.
Then I played the Russian wild card by briefing my teammates on Steve’s proposal.
It’s difficult to describe their reaction. “Nonplussed” is probably the best word. They had difficulty processing any economic scenario that had the word “gold” in it.
“That’s ridiculous,” our Harvard guy said. “It has nothing to do with the scenario we were given and it makes no sense anyway. Gold is irrelevant to trade and international monetary policy. It’s just a dumb idea and a waste of time.”
The RAND guy was a little more intrigued and asked a few questions but clearly was not prepared to move in the Russian direction. I urged my teammates to take the plunge with Russia and set the United States back on its heels, but they were not persuaded. They were soon back to drafting their noncommittal communiqué on the original problem.
“Okay,” I said. “I have to get back to Russia on this. Can I call a summit to give them our answer?”
“Sure, go ahead,” said Harvard. “We’ll keep working on the scenario.”
Pretty soon Steve and I were back in the summit conference room.
“Look, Steve, I can’t get my guys to go along. I’ll keep working on this over the next few rounds, but you’re on your own for now. I can’t blame you if you pull the plug on this; I really thought China would see the benefits and we’d do this together.”
“It’s fine,” he said. “The Russia team really likes this. They think it’s about time someone stood up and showed what a scam the dollar system is. Too bad you can’t join us, but we’ll go ahead anyway. Let’s see what happens.”
By the time I got back to China, our team had finished drafting the statement representing our move for this turn of the game. It boiled down to saying nothing and doing nothing. It was the perfect academic solution and would teach the Pentagon exactly nothing. Now it was time to go back to the war room to announce our