The Dollar Crisis: Causes, Consequences, Cures , Revised and Updated Reviews

• The US Dollar Ponzi Scheme - Uncharted Waters

  
  By ABB3NALRRBZXD on 2003-09-13
  Richard Duncan's "The Dollar Crisis" is written in a fairly straightforward manner. It is a distillation of ideas about the monetary system, and facts and figures and examples. He tries to highlight key facts and ideas, and repeat them sufficiently so you won't miss them.

  In this sense its rather good for someone who is not a specialist in this area, or has not been exposed lately to some of the concepts of international monetary exchange. I have an MBA, and a solid background in economics, and found the level to be just a little tedious in places but overall very good for review, and adequate for refreshing my memory.

  It may not appeal to readers with no experience in economics or financial matters, since they will need an introduction to what money really is all about, and how an economy functions. It will also not appeal to dogmatic economists, but then, nothing but their own schools ever do anyway.

  I am rather enjoying the book, and recommend it to anyone who wishes to delve further into the impact of the money system on macroeconomics and the world's finances, beyond the decision for 'the next trade.'

  This book is helping me to think about the dollar as a 'medium of exchange' in a more theoretical manner. It is helping me to focus some of my own thoughts on the subject, and provided a good of the international accounting system.

  We really are in uncharted waters. Never before in history has the world had a 'reserve currency' that is relatively unrestrained, with a 'master' who is willing and able to debase it to suit their policy needs, and manipulate markets in concert with their peers to prolong the situation and defeat the regulating systems of the markets, such as interest rates and exchange values.

  We are in a feedback loop of mutually assured financial destruction with Asia.

  We are supporting their economies by consuming their exports in a huge way, and they in turn are accepting our debt instruments (dollars) and using them to expand their own economies, as well as our own by buying our Treasuries, Corp bonds, GSE debt, and equities.

  It seems like an endless round of bubbles have been created as the Fed seeks to avoid crises and keep this Ponzi scheme going, because that's exactly what the dollar is these days. Make no mistake about that.

  It sets out some of the timelines nicely with the appropriate facts and figures, and helped me to understand the progression of events and the key decision points.

  I don't think of Mr. Duncan as an Austrian, since in the first half he avoids the dogmatism that Austrians often fall into, which is the weakness of a theory that has never been tested and refined, while being academically marginalized. Since I am an 'Austrian' you can take that as a sincere criticism if you are so inclined.

  As far as his solutions, I won't comment because I do not wish to give away the ending as they say, and I wish to highlight the book for its value in helping the reader organize a complex reality into some manageable ideas. In this Mr. Duncan exceeded my expectations.
  
  

• Good information & case for international diversification

  
  By A3PLI8V9LTC6MF on 2004-01-03
  This book presents a fact and chart filled analysis of the recent history of the U.S. economic big picture, and how this fits into the global scenario. From this, Mr. Duncan explains his conclusions on why and when the U.S. dollar will plumment.

  He must be commended for all the research and the way the many charts and explanations build a solid case that there IS a considerable long term risk to the dollar, unless the current overall trends (public and private) in the U.S. economy change.

  As a layman student of the markets and economics, I found this a very interesting read, and believe that the information presented is valuable to everyone who has a lot of dollar denominated investments.

  My main concern, is the author makes the all too common mistake in assuming:

  a. His scenario is absolutely certain.
  b. His timing (e.g. in our face) of the coming event is certain.
  c. His solutions would work, and are a must.

  Having read maybe 100 investment books in the last 25 years and having gained a fair amount of experience and perspective, I'll opine that this is vastly overstating his case. More realistically, he makes a strong case for why there are serious risks in a dollar-dominated portfolio, and therefore implicitly makes a strong case for a significant diversification to a global or asset (i.e. real estate, art, etc) segment of a prudent investor's portfolio.

  If Mr. Duncan had invested solid effort at the end of the book in providing cogent information about what the typical American investor could do to protect him/herself, instead of trying to convince his audience that he's absolutely right and the problem is imminent -- then this book would have earned 5 stars.

  As it is, the reader is forced to come up with the (balanced portfolio) advice on their own, which may well require more investment experience than the average reader can be expected to have.
  
  

• Retitle it "Total Global Government Will Fix Everything"

  
  By A11PEH8X6NUUY4 on 2004-11-30
  This book was a big disappointment. It is very poorly written and the "solutions" the author proposes for fixing what's broken with the USD & international trade border on economic lunacy. You think I'm exagerating? You decide:
  
  In the last chapter of this unfortunate book, the author proposes two "solutions" for the weak dollar and international trade imbalances. Here they are:
  
  1. Global Minimum Wage
  2. Global Money Supply Control
  
  I'm not sure these two ideas would fix USD & international trade woes, but they would undoubtedly result in massive global unemployment & inflation, and they would serve as a very solid foundation on which to establish global tyranny on a scale that is hard to imagine today. The foolishness and potential destructiveness of these ideas raises grave questions, in my mind, about Mr. Duncan's competence in the economic sphere.
  
  On every page you will find international trade and monetary policy jargon and vague chains of reasoning that are never adequately explained. This sort of writing may be fine for an experienced international trade professional, but it doesn't help lay readers seeking to learn more about the serious issues involved. I think many readers will find this book produces CONFUSION rather than clarity.
  
  One of the main theses in the book is that rising central bank assets cause inflation. While an argument can be supported that there is a "connection" between the two, one would be hard pressed to show that the connection is directly causal. Rather than clearly establishing a rational foundation for this claim, the author succeeds only in doing a lot of handwaving on the point. Inexplicably, the book focuses on reserve asset levels as the cause and ignores the inherently inflationary effect of fractional reserve banking systems & paper reserve assets. Hmmmm, I wonder why?
  
  Concerning the same thesis, the book offers up many, many charts and graphs displaying all sorts of statistics tangential to the point, but somehow, the author never quite gets around to displaying any stats that explicitly show the US rate of inflation increasing in step with the Fed's total reserve asset level. Hmmm? What a puzzler, Mr. Duncan. Seems like you'd want to back up the major contention of your book (which you repeat mantra-like ad nauseum) with just such statistics, yet none is presented. Curious indeed.
  
  Also, several graphs of central bank reserve assets are displayed, "...without gold", with no explanation as to why gold central bank assets are not included. Again, I wonder why?
  
  Every chapter is awash with unstated assumptions and vague chains of reasoning. Also, a large proportion of the statisics and studies on which the author bases his assertions & conclusions are from the IMF, for which Mr Duncan worked for years. In summary, the book appears to be nothing more that a global central banker proposing global central government "solutions"
  
  Sounds like the author subscribes to the well known dictum: EVERY problem looks like a nail if the only tool you have is a BIG HAMMER.
  
  To be sure, there are useful descriptions of certain aspects of the machinery of international trade and banking, but you'll have to dig through so much confused thinking and just plain muddy water, it's not worth fishing out the occassionally satisfying tidbit.
  
  Save your money!! This book only serves to confuse the issues involved. Consider yourself warned.
  
  
  
  

• Really flawed economic theory.

  
  By A2PEVP36Y5A2EQ on 2003-07-20
  Summary and rating comment:
  This book economics theory is flawed. It assumes that foreign central banks hang on to 100% of the accumulated U.S. current account deficits. Instead, the U.S. current account deficit gets reinvested in U.S. assets. He explains that overseas banking crisis since 1977 were triggered by large U.S. current account deficits. But, these deficits got materially large only after 1998. The author maintains that U.S. households and businesses have deteriorating balance sheets. Meanwhile, a review of Fed data shows the opposite. Flawed economic assumptions go on and on within this book.

  Abstract:
  The author states that the foreign banking crisis in the eighties and nineties were caused by the U.S. running large current account deficits. These U.S. deficits caused a built up in dollar currency reserves of the exporting countries central banks. These excess reserves caused lending booms, and asset valuation booms. These ultimately lead to banking crisis due to borrowers defaulting on their loans which financed overvalued collateral.

  His explanation of foreign banking crisis ignores the basic international accounting equality that current account deficits equal net foreign investments flowing back into the U.S. He states that foreign central banks reserves increased by the same amount as the U.S. current account deficits. They did not, as U.S. current account deficits get reinvested in U.S. assets by the foreign exporting countries. Thus, foreign central banks do not hold on to their countries current account surpluses.

  Additionally, the author mentions 24 countries which suffered banking crisis between 1977 and 1997 all due to the infamous U.S. current account deficits. But, the U.S. current account deficits never exceeded $150 billion until 1998. This deficit level is peanuts within a global trading system measured in $trillions. Thus, the U.S. current account deficit can?t possibly explain foreign banking crisis going back to 1977.

  Many of the countries he mentioned that experienced banking crisis in the nineties (Indonesia, Korea, Malaysia, Philippines, Thailand) were actually running large current account deficits themselves. Thus, current account surpluses were not a factor in their respective banking crisis.

  The author also states that the current account deficit caused an asset inflation boom in the U.S. particularly in stocks and real estate.

  Here, the author runs into a contradiction that he chooses to ignore. How can the same U.S. current account deficits cause an asset inflation in both the exporting countries and the U.S. (importer). As mentioned, they certainly are not responsible for the asset inflation within the exporting countries. They could have caused asset inflation in the U.S. since these current account deficits have gotten reinvested as direct foreign investments in the U.S. But, the U.S. incurred a stock market boom from 1995 to 1999 when the current account deficit was not that high. And, it suffered a bear market since early 2000, when the current account deficit got significantly larger. These outcomes are the opposite of what the author theory suggests.

  The author also mentions highly inflated real estate prices. Meanwhile, U.S. commercial real estate valuation have been lackluster for the past decade. Residential real estate is really a local market that varies greatly from one county to another. At all times the U.S. will have residential markets that appear overvalued and others who appear cheap (nothing to do with current account deficits here).

  The author makes a popular case that the U.S. current account deficit level is not sustainable, because the U.S. can?t borrow that much. Well, is that really the case? We are really talking of prepaid self financing here. If China experiences a $100 billion current account surplus with the U.S., we actually pay the Chinese that money upfront. They don?t have to raise a dime themselves to reinvest this $100 billion back into the U.S. These foreign direct investments are broadly diversified between bonds, stocks, and direct investments. If we look at the U.S. net foreign investment position divided by the U.S. net worth (assets minus liabilities of individuals, businesses, and government), this ratio is only 6.3%. Several countries have foreign investment position ratio 50% or greater than the U.S. Australia has a ratio equal to 14%, Canada is 10%. I developed a model showing that the U.S. could sustain its level of current account deficit level for another 20 years to reach the same net foreign investment position as Australia today. And, Australia is no basket case. It?s economy is doing a lot better than Europe and Japan. So, the U.S. current account deficit appears sustainable for at least a couple of decades.

  The author maintains that the U.S. consumers and businesses are already dangerously over leveraged, and thus, he expects rising defaults. However, actual Fed data contradicts him. Household balance sheets remain strong. At 2002 yearend, household debt represented only 24% of household equity. Meanwhile, businesses have steadily improved their balance sheet over the past two decades, as their respective Debt/Equity ratio declined from 150% in 1980 to 82% in 2002. The author supports his theory with media headlines on corporate failures (Enron, WorldCom). But, these are isolated attention grabbing incident. Looking at the balance sheet of the whole economy, as we did, you get a different picture. Unfortunately, dull good news never sells.

  The author?s theory that the U.S. current account deficit is the cause for the World?s deflation is ludicrous. The cause is China?s exporting boom Worldwide. Also, China is buying dollars to keep the Chinese Yuan artificially low relative to the dollar and maintain its export surplus with the U.S. Thus, deflation is a Chinese phenomenon associated with its being the lowest cost producer and its manipulating the value of its currency.
  
  

• Whirrrrr...

  
  By A3RYBULQYS14AA on 2003-09-22
  That's the sound of Ludwig von Mises, quoted at the top of Chapter 1 no less, spinning in his grave.

  Richard Duncan has written a pleasant enough book, and while he occasionally uses some oversimplified cliches (such as the Hair of the Dog analogy), overall there are plenty of easily digestable facts, making it a comfortable read.

  He uses those facts and an almost Austrian school-like analysis to jump to some unlikely conclusions for an economist: Keynesian economics has failed, but what is needed is more Keynes. The free market has failed, we need a world minimum wage. Monetarist inflation of the dollar is insupportable, we need a UN currency to inflate. In short, he advises world socialism of the sort detested (and thoroughly debunked) by von Mises and F.A. Hayek.

  I hope that any resulting academic discussion will lead Mr. Duncan to sounder conclusions in his next offering. Alternatively, maybe he can sacrifice some readability in return for a more rigorous chain of logic supporting his call for socialism.

  Before you sign up for Mr. Duncan's vision of the future, I suggest you read Henry Hazlitt's "Economics In One Easy Lesson."
  
  

• The Downside of the Dollar Standard
  By A3H86VWLHHG96C on 2005-07-26
  Since the breakdown of Bretton Woods in the early 1970's and the end of the gold standard, the dollar has become the international reserve currency. The 20 years prior to 1970 international reserves increased only about 55%, but since 1970, with the adoption of the dollar standard, reserves have increased over 2,000%. This is primarily a result of US current account deficits, which last year ran about $600 billion - about 3% of GDP. Asian central banks hold about $2 trillion US dollar-denominated reserve assets. This surge in international reserves has created huge imbalances and it is the subject of this book by financial analyst Richard Duncan.
  
  The dollar standard has allowed the US to finance incredibly large deficits by printing more dollars. The dollar standard has on the upside ushered in the age of globalization that has allowed Asian economies - first Japan, then the Tigers, and now China - to devolop by exporting to the US without importing equal amounts, leaving Asian central banks with large stockpiles of dollar reserves. And what can Asian central banks do with these reserves? About the only thing they can do is invest in US corporate stocks and bonds, T-bills, and US agency debt such as Fannie Mae and Freddie Mac. (We've been enjoying low mortgage rates because the Asian central banks buy up our debt so we can take out more.) And all these investments in return allow US consumers to buy more of their exports - call it vendor financing.
  
  According to Duncan, these current account deficits and current account surpluses have already wrought havoc with the world economy: it caused the asset and stock market bubble in Japan in the 1980s; it caused the currency crisis in Malaysia and Thailand in the 1990s (Duncan was an analyst working in Thailand at the time and correctly predicted its occurence); and it is currently fueling the real estate boom in the US.
  
  Asia's export-led strategies require that dollar reserves are reinvested in the US; this prevents their currencies from appreciating. Indeed, if the Bank of China or the Bank of Japan were to invest in the Euro or any other currency, the bankers and politicians of those countries would quickly protest because it would drive up their currencies and make their exports less competitive.
  
  So then with the US increasing the world's international reserves at a rate of $600 billion a year, everyone is still happy for the time being. Asian countries are growing rapidly and American consumers have endless supplies of credit - using their homes as ATMs - however, this imbalance, unsustainable and in the long run, will precipitate an economic crisis. Even correcting this imbalance, if not done prudently, could precipitate a world economic slowdown.
  
  This book was written before the recent decision by China to stop pegging the yuan to the dollar. This was a baby step in the right direction.
  
  Duncan's analysis of the problem is very good, his policy recommendations, however, are questionable. He suggests, for example, giving global central bank status to the International Monetary Fund. That's a nonstarter for reasons obvious to Republicans. He also advocates a global minimum wage, giving workers more money to soak up excess supply. I can already hear the critics screaming no "world government."
  
  The main problem that needs to be addressed - and Duncan stresses it many times - is that there needs to be a regulatory mechanism in foreign-exchange markets. Central banks intervene in currency markets for their own benefit - such creating an export strategy - instead of looking for ways to smooth global business cycles. China, with its revaluation of its currency, is looking to become a responsible global player - we hope. If the powers that be do not act in concert to coordinate a soft landing of the current imbalances, we will all be heading for some frightening times.
  
  
• Tremendous effort towards economic literacy
  By A26BI7468TTWCM on 2003-07-10
  For the uninformed, semi-informed or even the informed who are willing to connect the dots about today's seemingly strange economic times, this book will guarantee a cold sweat. Duncan's book is a comprehensive, one stop portrayal of the prevailing bubble economics that have dominated the planet over the last decade. That process is currently running full tilt and seems terminal. He presents (sometimes redundantly, but bears repeating) the mechanics and impacts of the massive Dollar recycling operations (engendered by America's 5% of GDP trade imbalance: $500 billion plus annually). This in turn creates malallocations of capital, overcapacity, and rolling asset bubbles and busts, that regularly require costly bailouts and cleanup operations. Of course the bailouts are affected by applying even more "liquidity" in the form of more dollars and debt that the world (and especially the US) sorely does NOT need. This monetarism encourages even more moral hazard and bizarre economic behavior (borrowing against inflated assets such a homes to buy even more foreign made goods).

  The strength of Duncan's book lies in his use of an excellent set of tables and graphics, that allow the reader to piece together the variables and evolution of the dollar and credit bubble. He also offers a clear and concise snapshot of the history of several late 20th century bubbles such as Thailand, Japan and the United States. Additionally an understandable description and history of the reserve system of international trade and capital flow is presented. As the book was writtten in June, 2002, the inquistive reader may be tempted to try and update the book's data. The updates can be tracked by going straight to the sources (Federal Reserve flow of funds data, etc.)that Duncan provides. I can only advise the reader to take anti-nausea medication and skip lunch during this process, as the picture is not pretty.
  
  

• Excellent
  By on 2003-07-24
  The content of the book was amazing.
  The person who gave it one star complains about flawed economics. He easily forgot that economics is a flawed science by itself. Most of the famous theories that we as economists (including myself) learnt haven't worked. All I know for sure is that the modern era economics and the economists are totally out of reality. They are consistently wrong with their predictions and their theories and their implementation have failed dramatically.
  
  This book is an eye opener and as real as it gets. Some People will not like its content because they do not want to believe that modern economic policies have failed.
  
  (the person who complained talks about a model showing that the U.S. could sustain its level of current account deficit level for another 20 years)
  this statement is laughable.....
  The deficits if they keep growing like that they will destroy the dollar.PERIOD.
  
  MODELS are for people who sit in ivory Towers totally out of reality.
  The author of the book has proven right up to now and the dollar collapse has already started.
  AGAIN AMAZING WORK....One of the best books I have read on the dollar and deficits and the real dangers that lie ahead of us.
  It seems to me that some people can make the black white making the Debt problem of the US looking like nothing. The US phenomenon is the biggest CREDIT, DEBT, ASSET BUBBLE ever on this planet.
  We technically exchange paper money for goods and the thing is that the other countries accept that.
  
  My advice is:
  Buy this book and read it. It will open your eyes and pay off for its price multiple times. I got the idea about this book from Richard Russell's newsletter. He himself that has seen everything in his extremely succesfull career has been completely amazed by the book and keeps mentioning it.
  
  Do yourself a favor and don't listen to the economists that are consistently wrong. Listen to some people with experience in the field.
  
  
• Well written and researched
  By A1OCCKOBDFUOT on 2003-12-12
  A well written and researched book however I totally disagree with the solution. It appears to me that the solution is not to impose minimum wage controls on the rest of the world to stop them being more competitive than the US, rather the solution is for USA to stop living way beyond it's means.

  When an individual has gotten himself deep into debt to the point where default seems likely, then the way out (other than bankruptcy) is to increase income, reduce expenditure and pay down debt. This is essentially the same problem but on a much bigger scale. The solution is collect more taxes, reduce public spending and stop borrowing (USA). America has only been able to get away with this for so long because they are the only reserve currency. This is not rocket science and is the most obvious way forward. However this will cause pain for Americans who have gotten too used to a lifestyle that they can no longer afford and only a brave politician would try to implement the harsh realities that need to be implemented to solve this problem. Over time (10 - 20 yrs) a mixture of a falling dollar value(reducing imports)and debt repayment (reducing money supply)due to increased taxes and reduced expenditure will deflate this bubble somewhat. This will only be acheived if the US public is prepared to bite the bullet. The longer they leave it the harder they will have to bite when it blows.

  One obvious place to start with taxation, is oil. I believe that despite having only 5% of the world population USA consumes 25% of the worlds oil production. The world oil consumption amounts to $500bn per year. I understand that in the US, petrol is around $1 - $1.50 a gallon compared to Europe where it is over $5 a gallon due to tax. Why not double the price by phasing in tax rises each year over 7-10 years. Also tax cars with large engines (over 3ltrs) punitively to conserve oil and reduce its import. Having to give up a 4 ltr car for a 2 ltr one to save money isn't much of a hardship. Taxes could rise by a small amount slowly over many years to bring in more revenue. If America could balance its budget it wouldn't keep flooding the world with fiat dollars.

  The solution is simply that America must realise that the American dream ended a long time ago and is now a nightmare waiting to happen. No one wants to do anything about it because the solution is one that involves sacrafices. But the party is over so WAKE UP AMERICA.
  
  

• If you want to understand what's going on, buy this book.
  By A3T0P4EZ7OGLZ3 on 2005-03-13
  This was a very informative book for me, although I would recommend it only for those who have a reasonable understanding of economics, and who are familiar with international trade, foreign exchange, and Keynesian and monetarist theories. The author does explain these things, but you really need to know about them beforehand.
  
  The data and charts the author uses to inform the reader about what is going on in global trade and finance are impressive. I would wager that a book like this would have been impossible before the advent of readily available computer data. There is some repetition in the book, however, but it is convenient repetition.
  
  Before reading this book, I was aware of the problems the endless U.S. trade deficits are creating. However I was not aware of just how pervasive the problem is, and how one country after another gets hit hard by a powerful financial crisis followed by an intractable economic contraction.
  
  First the exporting countries get hit. An export country normally recycles most of its dollar surplus back into U.S. investments. What this means is that the U.S. pays for the excess goods it imports by selling either debt instruments, or real property, to the exporting country. But also, enough of the export country's dollar surplus gets converted into the local currency to cause a stock market and real estate boom and a rising currency. An example was Japan in the 80s: up and up went the markets, while the exporters were having an increasingly difficult time making a profit, because of the increasing local costs and an increasing currency exchange rate. Finally, the high stock market levels can no longer be justified and balloon goes pop, and we have a mess that can take a decade or more to clean up, as in Japan. And the author gives a convincing case for why China will be next on the hit list.
  
  The importing country, the U.S., in turn gets hit too. The recycled dollars from the exporting nations fuel a stock market boom, as in the 90s, with lots of new IPOs and new industrial capacity being created--and over capacity too. At the same time, U.S. companies, finding it ever harder to sell at home in the face of the ever rising tide of cheap imports, find themselves making smaller profits, and so less able to justify their stock prices. The collapse becomes inevitable, and happened starting in 2000.
  
  But what made this book an eye-opener for me is the author's well documented argument that we have experienced only Phase One of the U.S. contraction, in which the Fed reacts to the contraction by reducing interest rates drastically, and so mortgage interest rates, and so fuels a counteracting housing boom. Now, the contraction in each country that's hit is intractable, the author asserts, taking a decade or more to recover from, and none of the reviews posted on this website seem to have made any comment on the author's prediction that Phase Two of the U.S. contraction is therefore still to come. All that is covered in the second half of the book.
  
  The author, writing nearly three years ago, predicted that the low U.S. interest rates would cause a housing boom, and a lower dollar, which indeed they have. He also predicted that the low rates would give the contracting U.S. economy a stimulating respite, which they also have, because of people refinancing their homes and then using the funds to buy consumer goods. That stimulates production at home, but more imports too. However, the low-interest-rate Fed stimulus will grind to a halt, says the author, by 2004 at the latest, when housing prices reach an inevitable unaffordability level, and stop going up, even start coming down. At this point, the consumer binge fueled by home refinancing will stop, because everybody is up to their necks in debt, and can't refinance any more. The contraction will then resume with a vengeance--unless the Fed postpones the inevitable once more by pumping massive amounts of liquidity into the economy.
  
  Well, we seem to be just past the housing-boom price peak, the flood of imports is worse than ever, and over capacity is everywhere, and so far the author's been dead right about how things will unfold. The ball's now in the Fed's court. Phase Two of the U.S. contraction is inevitable, says the author, its exact nature, and when it happens, depending only on how the Fed tries to stop it! To me it looks like the Fed has decided to flood the markets with liquidity as the solution, while raising interest rates slowly to keep the dollar up. This should keep prices, including home prices, from falling for now, and may even make the stock market go up in another speculative bubble, as in the late twenties. But if the author is right, this will provide just a bit more short term relief before the inevitable massive contraction prevails and dollar falls much further.
  
  If you want to understand what's going on, buy this book. Many disparaging reviewers have made much of the author's curative proposal that the long-term problem of trade deficits might be solved by a slow increase in the minimum wage in exporter countries like China ($5 per day at present). The discussion about this takes up only the last few pages of the book. The measure might well help, but it will be a long time before anything like that happens, if ever. The proposal can be treated as merely a largely irrelevant speculative addendum for purposes of debate. Don't let it stop you from reading this eye-opening book.
  
  
  
• B O R I N G!
  By A22RY8N8CNDF3A on 2005-12-28
  Duncan takes 324 turgid/boring pages and way too many graphs to communicate the obvious: A dollar-based world-economy cannot last while the U.S. is running very large and increasing
  
  1)Trade deficits
  
  2)Government deficits
  
  3)Household deficits, and
  
  4)Business deficits (eg. pension funds).
  
  Much of the world (especially Asia) is financing economic expansion through sales to the U.S. by loaning us the money. Each of those nations will eventually become increasingly nervous about others' bailing out of dollars before they do - leaving them holding a bag of worthless paper. And if you don't believe me, read Paul Volker (former Federal Reserve Chairman) - he thinks the odds of a dollar-crisis in the next five years are about 75%.
  
  
  
• Great economic insight - Large government solutions
  By A3RDK727RO0VKI on 2004-08-25
  A fascinating book! When he is talking about his assessment of global economic conditions, he is very convincing, and the book is extremely well-written. He backs up his statements with lots of charts and tables. The book is divided into four sections - one on the origins of economic bubbles, one on the flaws of the dollar standard, one on the death of monetarism, and the final one on a global solution to the problems he outlines.
  
  It is this last part - on a global solution to the problems outlined - that is the reason I deducted one star from my review. It is not because it is not well-written. Like the rest of the book, it is. I just happen to disagree vehemently about the solution proposed. The solution he proposes requires working within the framework of the World Trade Organization, and/or the International Monetary Fund. In the words of Micheal Badnarik, the Libertarian candidate for president, "[The WTO and the IMF] rely on thousands of pages of confusing regulations and corrupt agreements between multinational corporations and oppressive governments". My belief is that anytime you trust a governmental, or in this case quasi-governmental, organization to fix a problem, the cure tends to be worse than the problem itself. To me, the best fix is to entrust the individual nations, and the individuals within those nations, to make decisions about their future, rather than relying on centralized planning. After all, it was big-government policies that caused the problem in the first place, when it was decided to rescind the gold standard.
  
  Having said that, I highly recommend the book for anyone who wants to know some of the origins of the current global economic situation. I found it fascinating.
  
  
• We can make it cheaper but we can't make it any dumber
  By AUW7NLR3V6UDO on 2005-08-14
  Anyone else remember that ad for Hush Puppies? Whatever became of that shoe company anyway... or its employees?
  
  Once upon a time the Japanese hit on an original idea: make things cheaply (like shoes) and sell them to Americans. Americans are unique among the people of the world in that they'll not only sell you the cotton for the rope you'll use to hang them, but buy it back from you after you've added value by twining it for them.
  
  Upon watching the Japanese grow rich, the Koreans, Singaporeans, Taiwanese and Hong Kong Chinese followed suit. They didn't do too badly themselves.
  
  Never ones to miss an opportunity, the Thais, Malaysians, Indonesians, and miscellaneous and sundry other asian backwaters joined the party, as well as the Mexicans, Brazilians, Indians, Argentinians...
  
  Then a strange fate befell them - one by one they went into deflation like Japan or hyperinflation like the latin american countries, or simply watched George Soros take their currencies down 60 or 70 percent like the "young tigers".
  
  Now China is playing the game. They look just as invincible as Japan used to...
  
  This is a scary book. Scary in the sense that it methodically lays out the case that unfettered free trade has led to the use of the US Dollar as the world's reserve medium rather than gold or the postwar Bretton Woods system under which currencies were pegged to gold-convertible dollars. The removal of any underlying physical asset from currency, and flotation of currencies against each other, has relentlessly injected credit into the economic system and inflated a series of unsustainable asset bubbles. Perhaps if you sold your shares of pimentoloaf.com and bought a million dollar efficiency in San Francisco with a fifty thousand dollar deeded parking space you doubt this.
  
  If so, read this book and soil thy drawers. Duncan's thesis is that the USA will be the last to walk the plank in the form of a collapsed dollar.
  
  But the scariest thing about this book is that after reading it I am clueless whether to buy that efficiency and wait until mortgage rates drop below one percent to sell it into the "death by ice" scenario of global deflation, or buy gold and bury it in the forest as the "death by fire" scenario of global hyper-inflation plays out. The reason I'm clueless is that Duncan is as well - the best he can do is suggest a global minimum wage and a global equivalent of the Federal Reserve.
  
  He suggests that Europe may come through in decent shape, but the book was published before the frogs decided that burning tires and dumping rotting vegetables was more their style than continental economic unity. Perhaps the Canadians will come through for the sake of the salvation of the world currency system.
  
  Buy this book. Subscribe to The Economist. Put your head between your knees and kiss your tush goodbye... and in my case I'm going to apologize to my little girl for drinking Beck's, driving a Toyota and typing this little missive on a Sony laptop.
  
  Then I'll roll up some Carolina tobacco in a Benjamin Franklin $100 bill and remember the sage economic advice "in the long run, we are all dead".
  
  
• The Dollar Crisis is Just One Crisis Facing the World
  By A1M8PP7MLHNBQB on 2005-08-20
  The basic thesis of this book is easily stated in a few short sentences: The world is on a United States Dollar standard. The dollar standard is inherently flawed and increasingly unstable. Its collapse will be the most important economic event of the twenty-first century.
  
  Mr. Duncan is based in Asia and has a first hand view of what he is talking about as well as the theoretical background to understand what's happening. Or at least he has a different view than we have here. ==His comments from a strictly monetary standpoint are pretty good. But I'm afraid that his conclusions don't quite agree with mine.
  
  First, one thing he urges as at least a partial solution is a Global Minimum Wage. You gotta be kidding. France can't even agree with the rest of Europe on how to do things. Are you really saying that the kid in Zimbabwe driving an ox team dragging firewood is to get paid the same as someone working in a factory in Taiwan?
  
  Second, he doesn't spend nearly enough time on the coming oil crisis. Today oil is $65 a barrel. The biggest 'economic event of the twenty-first century' is going to be the change in our entire culture as oil goes to $165 then $265 a barrel. The whole economic situation of the world changes as transportation has to change. It costs about $3,000 to bring over one of those 40 foot containers from Asia. What if that goes to $30,000? What happens to the economics of Asian manufacturing?
  
  The dollar crisis is just one of the fun and exciting things we have to look forward to in the next few years.
  
  
• Great points on international trade issues, poor solutions
  By A115235DZ84TD1 on 2003-08-27
  This book is really worth the read for anyone trying to make sense of our world economic environment. Mr. Duncan makes many persuasive points as he explains the cause of the boom/bust cycles that have occurred since the breakdown of the Bretton Woods agreement. A major point is that the proliferation of a fiat "dollar standard" has created credit inflation in the banking systems of export heavy nations. This increase in credit created much distortion and malinvestment, and the cycle ended with over-capacity and speculation. Asset bubbles were then created in equities and real estate. He also describes the "boomerang dollar" as the money flowing out of the US, because of our current account deficit, finds it's way back here as foreign nations buy our corporate, federal, and agency debt. Our budget deficit is largely financed by foreigners who then add the dollar denominated assets to their bank reserves. The author's work is well researched and presented.
  In part four the author presents his solutions to what he believes is a looming global deflationary depression. He describes a global minimum wage, and the empowerment of the IMF to basically become the world's central bank. It was enough to make the Austrian hairs stand up on the back of my neck. I believe his solutions are thankfully unworkable. The cost and logistics of overseeing the minimum wage compliance would be staggering. We have enough trouble enforcing work laws in our own country. How do we expect some UN knockoff to monitor an employer in Saigon or Calcutta? The author's solution to allow the IMF to use special drawing rights to provide global welfare makes me wonder if he may have written the fourth part of his book as an intellectual exercise, target practice if you will.
  Mr. Duncan's book is important in its factual examination of some very troubling global economic developments. I'm glad I read it. But, his solutions are way off the mark. Any real solutions come with much pain, it can't be avoided. We need a sound money system, less government intervention, and more reliance on free market forces.
  
  
• Starts with conclusion and then uses facts to back it up
  By A3DEMIAU9GJ8IW on 2004-05-14
  this book is typical of this "the sky is falling" genre. It presents many useful statistics about trade imbalance and growing debt for the U.S. However, rather than try to determine potential scenarios or outcomes, I feel like the author is always trying to make the data fit his conclusions. While these conclusions may play out, most people are just not that good at determining the future. For example, he talks extensively about the coming disinflation. Since his book, inflation has reappeared. Also, it seems like it's going to be with us for a while because of the Fed's agressive monetary policy, and strong demand from China for commodities.

  Also, he tries (like many others) to suggest a gold standard is better than the fiat standard we have. While I understand the sentiment, it's just hard to believe that in today's very, very complex financial world that we could ever go back to Gold. Besides, no one (outside of the gold circles) seems to care if money isn't backed by gold.

  Bottom line for the world: If I borrow $10, it's my problem. If I borrow $3 trillion, it's everyone's problem. In other words, the world is married to the dollar for now, and any other marriage (i.e., to a future currency) will take a lot of time to unwind. Also, countries are probably not going to stop buying our debt for quite a while since we're all hooked.

  Bottom line for the book: Great facts. Conclusions too far-reaching.
  
  

• A valid crisis - an unlikely resolution.
  By A3F8VLSZ032KJX on 2003-11-09
  Author Richard Duncan may not have been the first to highlight the dollar problem, nor is he the only one presently voicing concern.

  The ?problem? is that global economic growth is primarily driven by the US trade deficit, principally as a result of the strong dollar. The rest of the exporting world reinvests the US$ receipts back into the US to avoid selling dollars and appreciating their own currency (this would make their exports less competitive) and ?well, Duncan?s contention is that it can?t continue.

  According to the author, how will the wheels fall off the trolley?
  1/ The ability of the US to generate sufficient dollar denominated debt instruments is tied to the large budget deficit.
  2/ The budget deficit will eventually contract and balance of payments will be restored.
  3/ The effect of (2) will be to force repatriation of the trade surplus ie. widespread selling of the dollar.

  There is already a well argued case for depreciation of the dollar, and the US Fed appears to have acquiesced to this weakness since the beginning of ?03, but Duncan would (correctly) argue the order of depreciation required to solve the problem is much greater. Should the consumer credit binge supporting the US economy falter, perhaps as a result of a housing collapse, a chain reaction of reduced investment and downgraded commercial creditworthiness could be the trigger for a major decline. A decline in the dollar would likely become self feeding through speculative action and a ?rush for the exits?.

  The book?s weakness is in its closing chapters. Duncan proposes a global minimum wage as the solution to persistent trade imbalances. This is a fine academic proposal, but why argue for something that so patently will never occur?

  ?Crisis argues that a status quo in which the United States trades off its own financial assets in return for imported goods cannot be maintained. The conclusion: a significant fall in the dollar, is made very convincingly.
  
  

• My Suggestion: Read the End First
  By A14NLAZZWPAHJ7 on 2005-05-17
  While the first three parts of this book are interesting and thought-provoking, and the data the author presents appear authentic, the fourth part of the book is the first time the reader is given a glimpse of the author's considerable biases.
  
  Because the author is so radical in his fourth part conclusions and suggestions, I found myself wondering if any of the first three parts of the book were presented in an unbiased manner.
  
  Duncan, the author, seemed to be writing to imply that he was "just giving the facts", but the conclusions he draws from the data don't seem to follow from the data.
  
  After reading some of the faulty logic and far-fetched conclusions in his fourth section, I found myself wondering if any of his economics was valid at all (and consequently if I had wasted a great deal of my time reading the book). Had I understood the biases the author presents in the final section of the book, I probably would have selected another book to get my information from.
  
  Two stars is as high as I can rate this book. It may be worth only one.
  
  
• Oft-repeated ideas and so-so narration
  By A2QKCOX5ACRHC5 on 2005-10-10
  Yet another book talking about why the dollar will 'crash'. The ideas and premises in the book does merit serious consideration, though the premises themselves are not exactly original. The issues related to growing trade deficit, budget deficit, and the use of credit has been well documented before, and this book joins that chorus. The analysis is fairly sound, but the repetition of the main ideas ad-nauseum is jarring. Overall, a decent book if you haven't read any other book with similar themes, but not necessarily a "must-read".
  
  
• Some good points but too verbose and lot of assumptions
  By A2EIO2R2DLAQQL on 2005-11-10
  The main premise of the book has merit. Which is, huge US current account deficit is leading to excess reserve for trading partners which itself is leading to credit expansion and asset price bubble for trading partners. Reinvestment of excess reserve back to US is inflating asset prices in US. Current monetary system does not have strong governing mechanism as the gold standard had.
  However, these points are repeated multiple times in every chapter and there is no new information after first couple of chapters.
  Some of the points were not well grounded and included many assumptions. For example, author keep saying that price deflation is not good. In fact, import price reduction is generally good for importing country. Even for exporting country it is not bad as long as there is sufficient productivity gain. Author never talked about productivity at all. In fact, he implicity assumes that cost of producing goods in two contries are only determined by wage rate (what about productivity).
  The argument about raising global minimum wage to increase demand was not sound at all, it has so many hidden assumptions. No evidence of higher minimum wage increasing demand. Besides, no mention of increasing productivity which is often linked to increased wage rate.
  
  
  
• A bit rushed, yet a valuable book nonetheless
  By AXLF55H6VBFTM on 2004-04-21
  As I write, the Fed has declared victory over the deflationary threat and is getting ready to raise interest rates. Thus, one reading this book would think that its dire warnings regarding deflation constitute old, passe news. They should beware. Duncan wrote this book in order to further educate people amongst the common investor class as well as analysts/economists about how dire the *overall* economic picture is in America. I.E. Said deflationary threat may have seemingly dissipated, yet the larger trends outlined in the book beg the question over whether disinflation/deflation have truly been knocked out in favor of a genuine economic recovery.

  For any student of economics, political economy or investments, this book will serve as a rare and valuable primer regarding the real reasons why we are the richest nation on the planet, the core reasons for said status, the true nature of "money", and our relationships with other nations deemed as our "creditors". Quantitatively supplemented with charts, tables, graphs, quotes and figures cited directly from sources such as the IMF, Federal Reserve and luminaries/authors in the field (Stiglitz, Soros, Von Mises, Keynes, Friedman, Krugman, et al.), Duncan certainly backs up effectively his core assertions. If nothing else, the book serves as a mini course in global finance and macro-economics, and thus deserves a read.

  The book didn't get much press or publicity in the U.S. after it was published in 2003. No wonder. Its bearish tone and thesis are hardly qualities that Kudlow and Cramer would rant about, let alone even cite cautiously. However, the book does compliment other compelling texts with similar subject matters such as "Conquer the Crash" by Robert Prechter, Jr., "Financial Reckoning Day" by William Bonner, "The Case Against the Fed" by Murray Rothbard, "The Truth About Markets" by John Kay, "The Mystery of Capital" by Hernando de Soto and even "After the Empire" by Emmanuel Todd -- in describing what would otherwise be washed out in the mainstream media and press.

  I was initially put off by the grammatical oversights that pop up every now and then, yet later figured that the book practically went from author's computer to the printing press. That's rare, considering the large publisher, yet considering the urgency of the material, I overlooked it. Again, the majority of the content outweighs aesthetic concerns.

  Also, Duncan can be annoyingly redundant with many of his core points, which, coupled with the above complaint, gives the book's writing the sense that no one else really reviewed said text. Yet, again, the urgency of Duncan's arguments, that our current account and trade deficits are out of control, that foreign creditors are starting to show palpable concern, that current trends resemble past lead-ups to crashes while out-sizing them, amongst other points, mitigate such concerns.

  The language he uses in describing his latter proposals is rushed and not as empirical as what he revealed earlier, yet his proposals are bold enough to warrant attention. If the reader wholly disagrees with his proposals regarding how to confront and treat our Himalayan-sized global money imbalances, at least the reader has a sober, solid foundation after the first 3/4s of the book for trying to arrive at their own proposal(s).

  Great book, generally. The type of text that should be required reading at the *high school* level nowadays (yes, indeed, raise the bar...considering what future generations must contend with, debt-wise).
  
  

• Dollar denomination investing
  By A5WMBIOGE8Q6N on 2005-04-01
  Gold Trade created equilibrium in the trade deficit. Here is how it worked. Gold must leave the country in the form of a payment for a commodity. As gold flows out credit contracts and the economy recedes, so product prices become cheaper. Cheaper product price cause foreign nations to make purchases and gold flow into the country where foreign country purchases with gold payments. Product price would control the inflow and outflow of gold seeking equilibrium. A country experiencing a trade imbalance would accumulate more gold, the surplus would be credit, expanding credit would fuel an economic boom, provoke inflating prices, and inflated prices would slow down exports and import rise.
  
  Gold reserves prevented budget deficits. With only a limited amount of credit available to the government, borrowing would drive up interest rates making it more difficult for business to borrow money. The government would crowd out the private sector with its borrowing. Government deficits also tend to result in trade deficits and gold outflows. Initially the government spending would stimulate the economy and imports would increase inline with the growth of the economy; however, as gold left the country recession pressures would return, gold would leave the country, interest rates rise, and prices fall. Recognizing the undesirable effect deficit spending would have on the economy the government would attempt to maintain balanced budget as long as the country was at peace.
  
  Brett Woods created a fixed exchange rate system in which the U.S dollar was pegged to gold at $35 per ounce. The value of the dollar was back by the gold reserves of the United States. The 1960s represented a breakdown with heavy investment overseas and rapidly increasing expenditures from the Vietnam War contributed to the country's balance of payments. Foreign countries found themselves holding dollars and began exchanging the dollars for the gold reserves
  
  In 1971 the gold flow was small but by 1973 the flow was a torrent. In 1973, Nixon suspends the gold for dollars policy and opened competition for currencies to be traded against other foreign currencies.
  
  Bubble economies overheat, hyper-inflate, and burst leaving their governments in political disarray and deeply in debt.
  
  Large inflows of foreign investment are stored in banks and banks use the money to create credit. Monetary authorities sell bonds yielding rates to the public to soak up the undesirable liquidity and reduce the money supply. Foreign assets in banks cause the money supply to rise.
  
  Hyperinflation occurs when monetary authorities fail to soak up liquidity, as was the case with Asia monetary authorities who failed to regulate their foreign inflow of money and banks generated credit leading to hyper inflated land prices.
  
  New currency to purchase foreign assets is possible as government issues bonds to create high powered money. In 1980, the U.S had $4 trillion credit market and by 2001, the credit amount was $29 trillion.
  
  The imbalance of trades created a credit expansion. For example, Japan banks used the trade imbalance to increase the money supply 356% in the 1960s. At the end of 2001, the U.S held $2.3 trillion indebtedness to the rest of the world or 23 percent of GDP and $500 billion surplus is reinvest back into U.S dollar dominated assets. One could argue that credit growth is equivalent to GDP growth and therefore manageable. Growth is a function of corporate profitability and profit alone sustains the growth not debt with debt provide short term benefits. Private invest rises more than consumption during strong economic growth and personal consumption makes up the majority of demand in all major economies. 1990s experienced larger GDP than normal as an increased share of private investment purchased software and equipment for the dot.coms and telecoms. As financial credit worthiness worsen, credit extension slowed down expanding only 2 percent in 2002. Hard hit by credit troubles companies were quick to fire employees unemployment between Oct 2000 and June 2002 rose to 8.4 million and the rate rose to 5.9%. Consumer indebtedness is fueling consumption in the U.S. Consumers are have a hard time servicing their debt and borrowing 78% of GDP. Debt can not expand faster than income indefinitely. The sharp debt is occurring at a time when interest rates have never been cheaper. Pressure starts to mount against the consumer as interest rise and interest payments become a heavier burden. Without new loans to refinance old loans they must declare bankruptcy. The bubble does not recede slowly, it crashes. Switching to the government sector, in 2005, a federal debt of $8 trillion will expense the government $500 billion in interest payments, 4.5% of GDP with little doubt the government can service its debt. Systematic banking crisis accompany economic crisis, for example, 30 percent of banks fail in the great depression. Duncan points out that the risk is the $150 trillion derivatives market meltdown.
  
  Surplus nations earn their surpluses in US Dollars. By investing their dollar surpluses in US dollar assets, the trading partners of the United States helped fuel the stock market bubble, facilitated the incredible misallocation of corporate capital, and, by acquiring Fannie Mae debt, contributed to the dangerous rise in US property prices. Where did the money go? U.S bond market total $2.5 trillion a $400 billion increase 2001 to 2002, commercial paper $1.32 trillion, mortgage related securities $1.01 trillion, new issues corporate bonds $388.2 billion, Fed agencies long term new issues $453 billion and $659 billion short term, treasury gross coupon issuance $233 billion, and municipal issuance $196 billion. Surplus nations need $500 billion of investment vehicles each year in the financial, corporate, and household sector. At present 40 percent of privately held U.S treasuries is held by foreigners. The risk occurs should the foreign country decide to sell off for political or economic reasons. For this reason it is unlikely the percent will exceed 50 percent. Surplus nations would need look too the private sector to spend $250 billion dollars and the $800 billion U.S budget deficit will play a part of a safe dollar denomination asset. Between 2000 and 2002, U.S equities markets lost $8 trillion in market capitalization or 48 percent drop but still maintaining a P/E of 26. Surplus nations are less prone to invest in a market with high P/E ratios seeking a 15 P/E viewing the stock market as overvalued. The remaining major investment is direct investment through purchasing U.S companies and U.S companies must maintain the attraction by keeping their earnings high. A slowing economy will deter foreign investment.
  
  Deflation occurs when supply exceeds demand. World War I, when the began and 1917 when the U.S entered the war, U.S gold reserves rose 64%, as Europe exchanged its gold for U.S goods. Once the war end, gold continue to flow into the U.S as allies repaid their war debt. The credit base double during this time period, industrial machinery and equipment output rose by 205% and all producer durables increased by 257%. This surge in industrial capacity created an oversupply by 1926 and as a result the wholesale price declined. In 1921 the fed sold large amounts of government debt and caused credit to contract by 8% through the economy into a brief recession.
  
  When the dollar earnings of the surplus nations are deposited into their domestic banking systems, those dollars, being exogenous to those banking system, act as high powered money and spark off an explosion of credit creation. Excessive credit creation permits over-investment, which, in turn, causes excess capacity and deflation. So long as the huge US current account deficits continue to flood the world with dollars, global deflationary pressures are very likely to continue to build, as reckless credit creation results in more industrial capacity than can be absorbed at the prevailing price level.
  
  Falling product prices make it impossible for businesses to repay their bank loans. A similar process occurs when excessive credit creation causes asset price bubbles in the stock market and the property market. Rapid loan growth causes asset prices to rise. Frequently banks accept the inflated assets as collateral for additional loans. This process continued for so long in Japan that the imperial gardens in Tokyo came to be considered as valuable as California. Eventually, it becomes impossible to pay the interest expense on such extraordinarily overvalued assets. The owners default, the banks then refuse to make new loans, the house of cards in asset prices begins to shake, panic sets in, the bubble pops and banks fail.
  
  
  
• Starts Slow, Finishes Strong
  By A18AP4GWLN3XCA on 2006-08-18
  This is a fairly ambitious book about Mr. Duncan's conviction that the dollar will soon collapse. Written to convince readers of the author's thesis, it is filled with graphs and other technical charts that provide evidence for his theories. The first two parts list graphs publicly available from the Federal Reserve website and then weave together a doomsday scenario based on the increasing debt of the world and the trade deficit. I was impressed with the evidence but concerned that the author was setting up a straw man to attack by not considering the U.S.'s low population density and ability to attract immigrants and continued foreign investment. (Also, with respect to the trade deficit, keep in mind that re-balancing the deficit may require us to force other countries to buy things they don't need. One economist has pointed out that we all have trade deficits with our barbers, because we pay them money for haircuts but they don't buy anything from us, technically creating a trade deficit. Of course, the difference is that the barber would usually invest the money locally, but the author doesn't do a good job explaining both sides of the trade deficit.) Part Three, starting with monetarism, is where the book revs up. The author explains that monetarism, i.e. pumping money into the economy to make it better during bad times, is like pouring water over a drowning child. He states, "The failure of those attempts will be the death of monetarism, which claims that any economic difficulty can be overcome simply by adjusting the money supply up or down depending on the circumstances. It will be death through drowning." For people who wonder what is happening when the Federal Reserve raises or lowers interest rates, this book provides a basic but very well-written overview of monetarism and may also provide some tangential insight into Bernanke's academic writings (Bernanke prefers inflation targeting rather than regulating the money supply, and the book seems to validate Bernanke's ideas).
  
  Grieder's _Secrets of the Temple_ is a much more detailed and fun to read book about monetarism and the Fed, and if you are able to invest the time, it is a better read. However, it lacks Mr. Duncan's concise explanation of monetarism as well as Mr. Duncan's proposals on how to fix the problems we face. One idea, a global minimum wage for export-based industries in other countries, is very interesting. He even promulgates a possible enforcement mechanism for this, and one has to give him credit for at least trying to suggest a solution. If successful, a global minimum wage should reduce the trade deficit we have with other countries and will spread Henry Ford's philosophy about rank-and-file workers being able to afford the products they make. I wish the author had either bypassed or made more fun to read the first two parts. It appears Mr. Duncan may have approached this book as a dissertation or textbook at first and added more "readable" sections later on. Indeed, the last chapter focuses on the "Bernanke put," which is difficult to understand but shows that the author tried to make his book as current as possible. Overall, this is a quick read that makes its points using good evidence. It would have been helpful if the author added a section suggesting what the individual investor can do to protect himself or herself in the future. I am _not_ making recommendations here, but other than gold, you may also consider investing in currency ETFs if you agree with the author.
  
  
• U.S. Dollars - Too Much of a Good Thing
  By A39NVY8RPC1YH4 on 2003-12-05
  There is an unsettling conviction to Richard Duncan's assessment of world trade today, and it is forcefully explained and supported with dozens of charts and tables. An enormous U.S. trade deficit has created a sea of liquidity and easy credit for those nations to whom we are indebted. Without a Global Central Bank to control the money supply, the debt and liquidity it provides keep growing. Nations on the Surplus side of this trading arrangement have few choices with their outsized inflow. If they keep it in their central bank reserves, their currencies will appreciate, their exports, and their economies will slow. If it is absorbed into their economies in the form of low interest rate loans to business and individuals it will spark inflation, excess capacity, and ultimately recession and deflation. Economic crises in Asia and Japan are evidence of this damaging cycle. Consequently, much of our indebtedness, our trade imbalance, returns from our trading partners like a boomerang, to buy dollar-denominated securities. Returning capital adds to asset inflation and creates more credit, more capacity, and fewer opportunities to make a profit.

  Add this: Our trade deficit is growing and at some point one or more market segments of the economy - direct investments, corporate securities, even government securities - will no longer accomodate this inflow of repatriated foreign capital. At the center of this mess is a structural flaw in our global economy. It began when the U.S. Dollar decisively replaced gold in the 1970's as the basis for value in world trade and became the de facto global reserve currency. In the absence of monetary controls our trading partners accept our promises (our bonds) in place of cash or gold in payment for trade. Up to what point is uncertain. According to Duncan our cumulative indebtedness to the rest of the world is approximately $3 trillion or 30% of our GDP and it increased by five hundred billion last year. A drop in the value of the U.S. greenback seems likely (for Duncan, "inevitable"). If it helps our exporters begin to bridge the import-export gap then let it happen. Longer term, Duncan calls for an escalating Global Minimum Wage in the export industries of our trading partners to stimulate the development of a consumer class to supplement the world engine of American consumption. Currently the International Monetary Fund (IMF) assumes the role of a supervisory central bank for national economies in crisis. Duncan would like to see its role evolve into a Global Central Bank. In an advisory role a GCB just might be politically acceptable and useful in moderating boom-bust cycles caused by trade imbalances. My only caveat with Duncan's thesis is that his case is made and repeated so strongly that it seems to disallow for the possibility of unforseen events leading us to a more benign state.
  
  

• Good treatment
  By A168YVZU839KB4 on 2003-12-30
  The review space says to keep it under 1,000 words. I'll do better than that. Many of the reviewers are very windy with their reviews. If you consider yourself a student of the science of economics this is a good book for debate. It has an interesting perspectives on world currency policy and an interesting solution for the obvious currency crisis that the world faces. Interestly enough, no one's listening to his solutions today, but 2003 delivered a relatively sharp change in US currency valuation. Like with most things from an economic prespective, interesting but have you considered.... (blah, blah, blah).

  Buy it. The book is definitely worth your time and money.
  
  

• Not just doom and gloom
  By A3ROZ2WCWPGZM7 on 2005-09-02
  As a non-economist I found "The Dollar Crisis" extremely informative as to how things actually work. Many of the topics discussed are playing out in our economy right now. Ever wonder why interest rates are creeping down to historic lows while the Fed has raised rates nine consecutive times? This explains that and much more. A must read for anyone trying to get a handle on what our economy is doing and how it works.
  
  
• Excellent data compiled, but flawed logic and too simplistic
  By AR8A90MSKB512 on 2003-08-05
  This is an excellent book in terms of the data provided. No comparable compilation of data in a recent book comes to mind, and that the book covers a recent event - an ongoing event, furthermore - is a big plus. It's also an excellent primer for beginner economists or anyone simply interested in basic economic theory to get some experience with macro.

  Unfortunately, before even touching on any flaws in economic theory, this book is simply lacking in logical development. Additionally, the solutions Duncan provides are far too simplistic. Duncan's overabundance of faith in the Bretton-Woods system - the concept of backing the US-printed bill directly to gold in a fixed ratio - is disappointingly evident throughout the book. The dollar bill is merely a medium by which 'credit expansion' and any other phenomena may occur. The system, not the medium, is the active responsible agent in the phenomena. Whether the dollar itself is used is not relevant.

  Perhaps the flaw in Duncan's logic can best be summed up to the layman by the catch phrase, "Guns don't kill people; people kill people." Even that comparison is not entirely accurate, because guns actually do provide a much simpler method for a person to take another's life than other available means. But then the concept is even truer - the dollar is just a method. The systems governing the exchange of the dollar are to blame for credit overexpansion. Japan's economic policy must be first and foremost to blame for Japan's own economic collapse.

  This can be paralleled in the use of the Bretton Woods system as an economic stablizer. The Bretton Woods system does not need gold to back the dollar - it merely needs SOME resource. It doesn't even have to be limited. Does it matter whether the system uses gold, or clamshells, or pebbles, or diamonds (the horror), or even copper? The answer is no. The dollar is currently backed on - itself. This is our current system. Duncan simply doesn't attack systems on anything more than a skin-deep level in this book, and his resulting reliance on criticizing or praising mediums (and suggesting solutions in terms of mediums) really raises a lot of questions about his analysis.

  There is no way I can even begin to criticize Duncan's flaws in economic theory in 1000 words, and past reviewer has already touched on that. So in conclusion, this is a book that had a great setup - there is a tremendous amount of data compiled here. This is particularly emphasized by the current (and ongoing) nature of the topic, and for this alone Duncan deserves a minimum rating of 2. Unfortunately, the book is disappointingly lacking in logical analysis and Duncan's solutions are far oversimplified. To anyone with any experience in economics (or logic, for that matter), the book will be a tough read due to his pervasive insistence on mediums and his occassional self-contradiction. This is the type of book that I would perhaps assign to my students not just so they can get a good look at data and some insight into the macro world, but so they can also get a chance to think on their own, outside of a text, and criticize Duncan where he has failed.
  
  

• The Ultimate Credit And Asset Bubble Has Arrived!
  By A2IP33O7WBJLU5 on 2003-10-23
  This is the remarkable story of how the dollar, unsupported by gold anymore, has gotten us into a financial mess. The obvious cause, Duncan states, is the propensity of Americans to buy inexpensive foreign made products instead of more costly American made products, workers in most other countries work for far lower wages than their American counterparts do. This outflow of dollars contributed, and is perhaps the primary cause of, the Asian and Japanese financial crises, as these exported dollars, in paying for America's large trade deficit, stimulated and overheated their economies by causing excess production capacity to be built, which later resulted in over-production and a downward deflationary price cycle. Most of these exported dollars, however, eventually found their way back into the United States (if these counties were to exchange their dollars into their own currencies, Duncan explains, it would increase the value of their currency in relation to the dollar and make their exports more expensive to Americans and thereby be less competitive, they would not like that). These dollars coming back to the United States are invested in various investment vehicles such as Treasury bonds, stocks, real estate, etc., but eventually, Duncan writes, these dollars find their way into banks, which overstimulates our economy by driving up real estate and stock prices to exorbitant levels, creating vastly expanded credit and very low interest rates. Basically, Duncan says stock market and real estate bubbles formed. Duncan goes on to write that our trade deficit with other countries amounts to 50 million dollars AN HOUR. Americans are living far beyond their means, with very little in real savings for bad times. Duncan many times writes that it is inevitable that the dollar must come down in value in relation to other currencies. When that happens, and Americans are forced to live within their means, it could spell economic chaos in the United States and in the exporting counties who depend on the economic engine the United States was as a major importer.

  Duncan says many times that equilibrium in trade between the United States and other counties must, sooner or later, be restored, and he gives reasons for this. Duncan proposes that a minimum wage be set in exporting counties, in jobs associated with exports, as a way of stimulating internal consumer demand to offset the eventual decline in exports to the Unites States, well, all I can say to this is something like this or similar must be done soon, as the alternative, Duncan says, is a protracted worldwide economic depression. I took one star off
  in my review as I thought Duncan at times repeated himself with excess at times. Overall, a very informative book. Another good book to read, of a similar topic, is FINANCIAL RECKONING DAY by William Bonner, with Addison Wiggin.
  
  

• Excellent until Part Four!
  By A20TFDDG75GXSF on 2006-07-04
  Ok, I won't review Parts One through Three of this book as there are numerous comments & detail of them in previous reviews already posted here, but just to say I felt Mr Duncan did an excellent thorough job of explaining the Causes & Consequences of the The Dollar Crisis that has been the result of coming off the Gold Standard and then the demise of the Bretton Woods system. Although I have a Finance Degree, I felt that the layman would also be able to follow his explanations due to his reiteration(repetition!) of salient points and good use of graphs & tables.
  
  The problem in this book is in Part Four - the Cures. This is where Mr. Duncan gives us two solutions to the coming Dollar Crisis..... so stop reading now if you don't want your reading spoilt!
  
  1. The development of a global minimum wage in less developed countries to stimulate aggregate demand, to be phased in over a period of years(10 years or so).
  Here Mr. Duncan DOES make a decent enough explanation and development of his idea and it is not without merit BUT the chances of getting the countries(China, Korea, Indonesia, Malaysia, Thailand etc etc) to ALL agree to this AND how to implement it AND not to cheat, BEFORE the Dollar Crisis blows up in our faces will be nigh on impossible! Surely we will be in the throes of the Greater Depression well before all those countries get their act together on this solution! So, bold as it is and as meritorious as it is, I think its too late I'm afraid!!
  
  2. The IMF as quasi-GCB(Global Central bank) to act as the world's controller/regulator of credit/money supply and deficits(a sort of deficit uber police!) was such a HUGE disappointment at the end of what was an excellent book to that point. Mr. Duncan doesn't even bother to give a lengthy, detailed explanation of how this would work; it's all skimmed over in a few paragraphs with no real depth to it at all! Surely something this major deserves "fleshing out"?!!!
  Firstly, this is exactly what the elite bankers want as part of their long term plan for world domination by having a world central bank and one world government(think New World Order)so they can consolidate their power and control the world's population even more while they just get richer. I don't think so!!! Bad, bad , bad idea!!!
  Secondly, (on a less conspiracy theory note!), why does Mr. Duncan think the IMF/World Central Bank would be any more reliable in controlling money/ credit supply, and therefore inflation, than the governments & central bankers we have now? We already know that all fiat currencies eventually fail because governments can't stop themselves from borrowing to spend and currie favour with voters and their central banks are incapable of sustaining a balanced world economy without inflationary bubbles(as he so adequately explains in Parts One through Three of this book!!!!).
  There can be only one reason why this solution would work and that is if the officials of this Global Central Bank & ultimately Global Government were UNELECTED AND THEREFORE DID NOT NEED TO CURRIE FAVOUR WITH THE ELECTORATE! THEREFORE THEY WOULD BE UNACCOUNTABLE; WE WOULD BE HIT WITH THE NEW WORLD ORDER TOTALITARIANSIM WE ALL KNOW MUST NOT BE ALLOWED TO HAPPEN!!!
  To be honest, we can't even disect Mr. Duncan's suggested solution properly because he didn't bother to go into enough detail on HOW it would really operate!!!
  
  SO WHAT IS THE REAL SOLUTION?
  
  It is the solution offered by well respected commentators and economists in growing numbers(e.g. "The Coming Collapse of the Dollar and how to profit from it" by James Turk & John Rubino; "What Has Government Done to Our Money? and The Case for a 100% Gold Dollar" by Murray N. Rothbard, to name two!) but discounted here by Mr. Duncan:-
  
  A RETURN TO THE CLASSICAL, OR BETTER STILL, 100% GOLD STANDARD IN SOME FORM!!!!!!
  
  Mr. Duncan dismisses this because of the financial pain we will have to endure due to the extended period of time it will take for the excesses of money supply growth of the last thirty years or so to be washed out(think The Greater Depression!), AND because you can't mine enough gold quickly enough to yield high enough growth backed by reserves of a REAL asset - gold!
  
  HOGWASH!!! That's exactly the reason we MUST return to a Gold Standard!
  
  We don't want a world where countries suddenly mine and then others aquire ungodly amounts of gold to boost their real asset reserves as that would yield boom & busts akin to those created by fiat currencies and the oversupply of money they ultimately yield. What we need IS slow steady growth for the whole world so that it is steady and sustainable in the LONG TERM! The fact that gold is scarce is exactly why the gold standard gave us a stable world for such a long time and was only crushed because our political leaders haven't got the gumption to find other solutions to world/political problems other than going to war for heavens sakes!
  
  The second point is the pain that will be inflicted when first returning to a gold standard. Well "boo, hoo!", TOUGH!!! That's the price we MUST pay! Yes we've been hoodwinked into accepting worthless paper/fiat currency in place of real(gold & silver) money, but the medicine MUST be comensurate to the disease and that's life folks, IF, we really want to get back to a stable world financial situation! Of course to cement this we must also rid ourselves of the private bank cartel central banks, like the Federal Reserve, that have been allowed to take control of our financial wealth and our governments!
  The populations of the world DESERVE to be given back their assets(i.e. gold) that have been stolen and replaced with worthless fiat currencies. At the very least they deserve a paper currency 100% convertible to gold and a return to the automatic adjustment mechanism of a gold standard. This in turn needs to be managed by our governments Treasury departments, and therefore accountable to the electorate, and NOT by privately owned bank cartel central banks who have control over our nations monetary finances for their own profit and nothing else!
  
  Only then will the governments and bankers be forced into accountability from their electorate to avoid lengthy recessions that can happen as the adjustments under a gold standard bring back financial equilibrium from excessive monetary stimuli.
  
  What's so wrong with long term slow steady growth anyway? People like stability!
  The only people this doesn't keep happy are the financial elite bankers and mega corporation owners who want to gain power and money as fast as possible while the rest of us become poorer as the real value of our paper money is eroded by inflation!!!
  
  People are just going to have to suck it up and get on with it in the knowledge that they are, at least, leaving the RIGHT legacy for their children's future.
  We must take the pain now of returning to a gold standard so the world and our children's future can be a positive one!!!
  
  Sometimes tough love is the best love!
  
  
  
  
• wow
  By A1VTGA59BBV41K on 2003-07-20
  been reading lots of eco books of late trying to make sense of how unbalanced things seem (overburdened household sector, japan's problems, internet bubble). here's a book that finally offers a plausible explanation to so many things. don't care much for his suggestions, but his diagnonis of current problems strikes a cord within me. read richard koo's balance sheet recession for additional plausible unconventional interpertation of current global problems.
  
  

• The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel
• The Sovereign Individual: Mastering the Transition to the Information Age
• Crash Proof: How to Profit From the Coming Economic Collapse (Lynn Sonberg Books)
• The Collapse of the Dollar and How to Profit from It: Make a Fortune by Investing in Gold and Other Hard Assets
• Empire of Debt: The Rise of an Epic Financial Crisis