The IMF and G-7 met in Washington over the weekend in an attempt to agree on the ‘collective management’ of the coming fiat race to the bottom. Dominique Strauss-Kahn, IMF managing director quoted “The problem is that we can talk and talk and talk.....The language is ineffective. The language is not going to change things. Policy has to be adapted. What we need is real action, and I don't believe that this action can be done in another way, in a non-cooperative way." Perhaps he had forgotten that policy action was the root cause of the problem.  Plenty of experts agree that a co-operative agreement to debase the world’s currencies in lock-step will end in disaster. Do they have another currency waiting in the wings?  Jim Rickards put a few candidates on the table at the King World News Blog:

“What is a currency war?  What they mean is each currency is trying to devalue against all of the others.  They all want to devalue but they can’t, it is a zero sum game.  Some people can devalue some of the time, but not everyone can devalue all of the time.”

“What is the solution?  The solution is to identify a store of value that everyone can devalue against all at once.  And there are two obvious candidates.  First is gold, and second it is to invent a currency.”

“The preference of central banks is to invent a currency such as the SDR or the Bancor.  But, the market’s preference seems to be for gold.  So the currency war comes down to a race between gold and the new paper currency.  Who will win?”

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