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Apocalypse when?

Jim Rickards is still at it. The former LTCM general counsel is obsessed with gold and seems to think the rest of the world is too. Indeed, he reckons gold is so important that it could lead to a new world war:

Rickards envisages the Chinese getting pissed at US monetary easing and retaliating by using its gold reserves as a financial weapon of mass destruction.

Clearly, Rickards thinks a gold standard would solve all this, but in fact his war game describes precisely the problem with using commodities as currency. He argues that China could hoard a huge amount of gold (using derivatives) and then sell it all into the open market to destabilise the global economy.

What he doesn’t say is why this would be less of a problem under a gold standard. If the dollar was backed by gold, the US would hardly be better off if China (or anyone else) chose to dump (or hoard) huge amounts of the stuff — and I can easily invent a plausible geopolitical scenario in which that could end up happening.

After all, history is full of examples of precisely this kind of thing, all the way back to Sparta and the ancient Greeks. Ever wondered why no country on the planet uses gold to back its money supply today?

By using an arbitrary metal as your currency, you open yourself to attack by anyone who can control enough of that metal — and you devolve monetary policy to foreign miners.

None of what Rickards says makes any sense at all from a security point of view, yet the US military pays him to share this nonsense with them. (I’ll let them read this blog post for free. Though I wouldn’t be offended by an offer of payment…)

The lunacy of Rickards’s apocalyptic prediction is on full display when he describes Chinese “hackers” taking control of the Fed and the Treasury, as well as turning off the internet and the power grid. Scary!

So scary, in fact, that it makes you wonder why China would bother spending trillions of dollars buying gold?!?!

Cyber warfare is a genuine threat, and it also demonstrates why his entire theory is obsolete. China doesn’t need gold to cause economic havoc. It just needs an internet connection and a few people who know how to use a computer, which is why we should work on being China’s friend instead of trying to think of reasons for bombing it.

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