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on August 26, 2003
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.
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on July 23, 2003
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 pewrson 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.
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on November 17, 2007
Although Duncan's "The Dollar Crisis" can occasionally be a bit of a tricky read, given the heavy use of technical terms and complicated graphs, recent events have shown many of Duncan's predictions to be true. The sub prime mortgage crisis, real estate crash and collapse of the American dollar are undeniable consequences of the dollar crisis.
In essence, Duncan explains how the end of Bretton Woods and the end of the gold standard have allowed for an incredible amount of growth, credit expansion and economic bubbles. However, this growth, largely export driven, is not sustainable in the long term. Though Duncan is somewhat unsure about the when, he is quite certain this will (and had already started occurring). Though he proposes a number of solutions to reduce the impact that this inevitable depression/recession might have, his principal solution consists of the creation of a global minimum wage.
Once again, "The Dollar Crisis" is not a light read and requires some concentration, but goes very much hand-in-hand with the predictions of other authors such as Kiyosaki. I recommend this read for monetarists and Keynesians alike.
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on April 12, 2004
Globalization is here to stay. Walls have tumbled and so have the barriers to trade. But in the process of creating a global economy that has seen rapid growth in global trade in the last three decades, have we committed any major blunders, atleast in economic terms ?. The answer seems to be an affirmative YES according to the author. During the days till the First World War, gold was the only currency that was acceptable across international borders. While the war led to the departure from this standard, paper currency flooded European markets, leading ultimately to the great depression of the 1930's. This was our first concrete lesson to realize that money, cannot be created out of thin air, for that matter even out of plain paper.
Bretton Woods restored the relationship between currency and gold and thereby linked exchange rates. The author explains how a country with trade deficit had to part with gold which in turn led to shrinkage of credit, increase in lending rates, fall in consumption and ultimately the restoration of trade balance. Gold clearly played the role of being the conscience keeper in international markets. A noble metal indeed.
With gold standard, everything was working fine and global accounts were balanced. Suddenly Uncle Sam with his insatiable need for foreign goods, thanks to the growing consumer demand at home and increasing military expenditures in his self proclaimed capacity to police the rest of the world, goes on a spending (and borrowing ) spree. The greenback is no longer exchangeable with gold, but in fact would have to be treated to be of value in itself. The rest is history as so well explained in this book. This book devotes atleast a third of its space for graphs, charts and tables taken from published international sources to support the arguments in every chapter.
What follows the departure from the gold standard is the generation of a huge US trade deficit with its trading partners over the last three decades. This deficit is paid alteast in terms of accounting, in Dollars that are not backed by gold. This paper money creates the following :
- Increase in investments in manufacturing capacities by multinationals in low wage countries
- Increase in capacities creates fall in prices of manufactured goods
- Fall in prices leads to higher purchases by Americans
- Higher consumer spending on foreign goods leads to increase in trade deficit
- US trade deficits lead to more Dollars with trading partners
- Trading partners experience asset appreciation in their countries
- Investments by trading partners in US leads to asset/housing/stock market appreciation.
Till here it is fine. It is like the first couple of drinks at the party and everybody is enjoying. But then it does not stop there, unfortunately. The drinks keep pouring in and the music turns to noise. The party soon becomes a nuisance to society. In the above sequence, the asset appreciation leads to asset bubbles and over investments leads to deflationary pressures. This leads to fall in corporate profitability which is followed by the collapse of stock markets and banks. Banks collapse and soon the party is over. The hangover unfortunately lasts longer than the duration of the party. Tigers soon become kittens as we saw in the second half of the last decade in Asia. And the kittens are too drunk even to move.
This book presents a very powerful case to argue that America will not be able to continue its trade deficits and that the global economy is on the verge of a collapse thanks to the overvalued Dollar. Overvalued by how much ? 50 % by one estimate. When will the dollar collapse ? Anytime from yesterday.
Consequences to various trading partners from Asian Economies including Japan, Latin America to the European Union is well analyzed. China will be the worst hit with its banks already facing up to 50 % non performing loans. Europe seems to be the safest, atleast relatively.
Any rescue package ? . Certainly, says the author who advocates a demand side stimulation of the global economy through increase in wages ( in export oriented companies in developing countries) over a ten year period, which would not hurt multinationals since daily wages are too low at $ 4 in countries like China and we can afford to take it to $14 by 2014. With Multiplier Effect, the author explains that this will lead to surge in demand to offset the slump in US Consumption. There is also the need for a Global Central Bank to restore normalcy in international currency standards. Monetarism will fail since we are on the verge of a liquidity trap with near zero interest rates as experienced in Japan.
It helped me to brush up my understanding of Macroeconomics and it is advisable to do so before reading this book. What has happened till date is supported by facts. What is likely to happen is frightening. Can I have a drink please ?
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on May 20, 2004
Having traded currencies successfully for the past 20 years, I found this book to be a credible resource. With the U.S. deficit spiraling in the wrong direction, we need to be aware of all the possibilities to create optimum contingency plans. This book will provide you with the information to make the informed decisions.
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on May 17, 2004
I first read The Dollar Crisis four months ago. With each re-read, the author's reasoning for and results of the coming dollar crisis makes more sense. It lays an extremely good foundation for the current world imbalance and makes valid predictions which are based on historical models.
Although I wish the author had given additional recommendations for what we, as individuals, might do to protect ourselves before the eventual dollar demise, I do believe his idea of establishing a Global Minimum Wage may be the best way, internationally, to avoid the collapse of the dollar. I wish him the best of luck if he pursues this ambitious solution.
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on December 4, 2003
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.
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on April 20, 2004
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).
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on January 2, 2004
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.
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on December 12, 2003
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.
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