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The Coming Collapse of the International Monetary System

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Here’s a World War D scenario for you, dear reader: as a retaliation for US sanctions on Russia in the wake of the invasion of Ukraine, Russia responds like this: hackers attack the New York Stock Exchange and force it to close indefinitely; the Russian government dumps its billions of US Treasuries in the open market, causing interest rates to rise and crashing the US economy. The banks go into turmoil as people panic and withdraw their money. It would be a Russian strike on the US, without firing a shot. 


That’s just one scenario hedge fund manager, economist and author Jim Rickards painted on the new era of financial warfare in his speech this morning at World War D. Rickards had the unenviable task of following on from Marc Faber’s opening act. But any man that’s war-gamed at the Pentagon is going to have a lot to say when it comes to financial warfare. And in a world of interconnected currencies, derivatives, hedge funds, and bond and stock markets, your money is right in the middle of it. We’re all hostage without even really thinking about it.


And if you think the Russian scenario above is far-fetched, Rickards pointed out that the US effectively did something similar for real in Iran. It was only a few years ago that the US government shut Iran out of the US dollar payments system. This was in response to Iran’s nuclear program. Iran responded to this and wanted to    sell their oil  in euros (Saddam Hussein threatened to do the same thing once). The Iranians quickly found themselves shut out of SWIFT, the European payment systems as well.  Within a year, Iranian oil exports fell over, the currency collapsed, inflation ran riot in the Iranian economy and the Iranians banks almost went broke. Rickards argued that the Iranian regime only survived because Obama eventually backed off the sanctions.


But the thrust of Rickards speech was whether the US dollar will survive in its role as the reserve currency of the world and hold the current system in place. It doesn’t take too much guesswork from the subtitle of his new book The Death of Money: the Coming Collapse of the International Monetary System to see where he stands on that front.


Rickards made the point that a major pillar of support for the US dollar is on wonky foundations: the Saudi-US alliance. The deal’s been simple for over forty years. The Saudis sell oil in US dollars only. The US provides protection and security to the House of Saud. This deal was brokered between Henry Kissinger and the Saudi royalty in the 1970′s.


Read the rest of this article at The Daily Reckoning


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