CHAPTER 8

Today’s Currency and Financial Wars

Currency Wars are one of the most important dynamics in the
global financial system today. Of course, I started talking about
this year ago in my first book, Currency Wars. My point then
is the same today: The world is not always in a currency war,
but when we are, they can last for five or ten, fifteen and even
twenty years. They can last for a very long time. There have
been three currency wars in the past one hundred years.
Currency War One covered the period from 1921 to 1936.
It really started with the Weimar hyperinflation. There was
period of successive currency devaluation.
In 1921, Germany destroyed its currency. In 1925, France,
Belgium and others did the same thing. What was going on at that
time prior to World War I in 1914? For a long time before that,
the world had been on what’s called the classical gold standard.
If you had a balance of payments, your deficit, you paid
for it in gold. If you had a balance of payment surplus, you
acquired gold.
Gold was the regulator of expansion or contraction of indi-
vidual economies. You had to be productive, pursue your com-
parative advantage and have a good business environment to
actually get some gold in the system — or at least avoid losing
the gold you had. It was a very stable system that promoted
enormous growth and low inflation.