While world currency markets appear to have stabilized as investors await a final decision on a settlement for Greece’s debt crisis, some voices on Wall Street are raising the alarm about a possible collapse in the value of the U.S. dollar and an ensuing round of destructive devaluations by America’s major trading partners.
One of the most outspoken supporters of this view is James Rickards, a senior managing director at Tangent Capital, which provides investment banking to alternative asset managers like hedge funds. Rickards has just published a book called Currency Wars: The Making of the Next Global Crisis, which predicts a dramatic drop in the value of the U.S. dollar.
Rickards maintains that the cause of the dollar’s decline is the Federal Reserve’s use of so-called quantitative easing to reduce interest rates. The Fed has bought more than $2 trillion worth of government bonds since 2009, in effect creating new money.
Rickards says in the book that when the dollar starts to fall, it will soon turn into a rout, which will be followed by competitive devaluations by rival countries seeking to preserve their position in world trade. “The growth of globalization, derivatives and leverage have made financial panic impossible to contain,” Rickards says.....