The book is pretty heavily biased towards conservative thinking and as a good liberal this bothers me.
I didn't like the tone but I kept reading because I wanted to see how the economy crashes.
Peter gets it right.
For thousands of years money was tied to tangible things with intrinsic value that couldn't be inflated or deflated on demand.
If you wanted more gold, you had to mine it. If you wanted more cowry shells you needed to find them. This mean that the simple act of saving was a safe thing to do. It was (and still is) physically hard to find more gold.
So when you saved gold, it held value. That value could be lent out. It could be put to use.
Now we have paper money. Most countries left the gold standard around the first world war. Winning a war will convince most any government to make bad choices. The US left the gold standard to try and hurry the end of the Great Depression.
$1 in 1918 is worth about $18 in today's money. Put another way that same dollar put into a shoebox for 100 years has devalued 95%.
$20.67 in 1918 was exchangeable for 1 troy oz of gold. Put this another way, you could have exchanged it for 48 mg of gold and that gold today would be worth $60.
... Why would anyone care though? We have paper money it buys things, right?
The problem as Peter puts it is ... any dollar as soon as it's earned is worth less. Most don't get raises at the pace of inflation. For hundreds of years prices in America were stable, or they fell as things got cheaper and more abundant. Since the supply of money was more or less finite, and since the amount of goods created increased prices fell. That's basic economics.
Prices made sense, because there was only so much money. Penny candy was .. a penny. There were stores called "the five and dime" (0.05 cent and 0.10 cent). Things got cheaper over time. Saving made sense as money was valuable.
Today's money, everything is always more expensive. It's always more expensive because the amount of money circulating is always growing. The amount of money circulating is always growing because the government needs debt because it can't raise taxes to pay for it's outlays.
That money must come from someplace.
Quantitative Easing (today's approved voodoo to print money) is where the central bank (not part of the government) buys government bonds (we agree to pay more dollars in the future for dollars today) in exchange for dollars. When the government can't afford the interest payments the government just issues more bonds which the central bank buys in exchange for more dollars.
Find a picture of the M2 money supply. We are talking oceans of new money, but it isn't printed, most of it is digital.
Since more dollars are circulating, everything is worth less, since everything is priced in dollars.
When everyone has more dollars (supply has grown) prices for things increase.
The 2008 housing crisis was caused by money oversupply. Instead of people saving to buy a house with finite money, too much credit was extended to weak borrowers. Suddenly there was a housing shortage because everyone was buying houses which drove prices up. Since prices were going up so fast, everyone wanted to invest. Since houses became investments (instead of a place to live), house prices became insane. Since there was a sudden housing shortage, builders went into overtime making houses no one really wanted that people purchased anyway, because they were great investments.
The bubble popped when interest rates rose. Interest rates rise when the central bank needs more money. Many of those loans were tied to floating interest rates. Many buyers didn't plan to actually live in their houses, they just wanted to resell them for a profit. Suddenly many buyers decided to default (no downpayment they aren't losing any of their money) The government rewarded people for flipping houses. The government guaranteed loans. Large sections of the housing financial market didn't have ANY risk or ANY incentive to use good judgement.
... Anyway, that's part of the book, or my understanding of it.
I removed a star because parts of it offend my liberal sensitivities, I really want to think we can just print money, be good socialists, tax the rich into oblivion, etc and it looks like there is a way (other countries do a much better job running their governments) but Peter doesn't want to give any solutions to the problems he points out. Most of the book is thinly veiled Libertarian Ayn Rand stuff, but ... parts of the ideology are correct.
Government does have a place but it's obvious sometimes the mistakes it makes are ... really, really bad.
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Farlsborough
A brave attempt but they don't quite pull it off
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Clear and understandable - not like economics at all
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