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Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown Hardcover – September 21, 2011
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Paper Money Collapse was the 2012 getAbstract International Book Award Winner!‘...An excellent introduction to the dangers of our current monetary system.' (therealasset.co.uk, January 2012)
From the Inside Flap
The recent financial crisis has exposed the instability of our financial system. While there is plenty of talk of reform, few commentators are yet willing to consider that the root cause could be the transition from commodity money to limitless paper money, although the track record of paper money systems is uniformly discouraging: Throughout human history, all paper money systems have either collapsed in chaos, or society has returned to commodity money (usually based on gold) before a total currency disaster occurred. This book shows why this was the case and why this is also the choice we are facing today.
Drawing upon ground breaking new research, Paper Money Collapse conclusively demonstrates why paper money systemsthose based on an elastic and constantly expanding supply of money, as opposed to a system of commodity money of essentially fixed supplyare inherently unstable and why they must, by their very nature, lead to economic disorder.
These highly controversial findings clash with the general consensus that elastic state money is superior to inflexible commodity money, and that expanding money is harmless or even beneficial as long as inflation remains contained.
In an engaging style based on extensive study and analysis, this compelling new book exposes the fallacies of mainstream macroeconomics and debunks erroneous conventional wisdom. It explains why many people working in financial markets, in the media, and in policy establishment positions are unable (and often unwilling) to fully appreciate the underlying problems with elastic money and the danger it presents.
Paper Money Collapse shows in the starkest terms that the recent crisis is far from over and that the solutions presented by the advocates of paper money around the world are misguided and inherently flawed, in particular the current policy of accelerated paper money production to "stimulate" the economy. If these policies are continued, a complete currency catastrophe will be inevitable.
An absolute must-read for economists, individual investors, and anyone with an interest in finance, Paper Money Collapse will change the way you think about our financial systemand about how to take control of your own financial future.
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He also rebuts the argument, sometimes used by opponents of commodity, or "inelastic" money, that a growing economy needs a growing supply of money to ensure stability. Untrue. At most, an expanding economy, with growing innovation, division of labour and productivity growth, should see a mild deflation over time (which is good for people who want to save by holding cash). But as Schlichter explains, there is no reason in logic or evidence why a mild price deflation should hamper economic progress once people get used to the idea that their money will buy a rising stock of goods and services through time. He uses the analogy of computers. In recent times, the hourly wages needed to buy, say, a mobile phone have slumped. Has that stopped people from going out and buying these devices? Of course not.
Schlichter's explanation of how fractional supply banking works is crystal clear and, in my view, he explains it slightly better than say, Murray Rothbard did in his The Mystery of Banking, although the latter book is still well worth reading. And Schlichter's style is more sober and less brash in its tone than the approach adopted by Thomas E Woods in his book about the crash, although Woods' explanation of Austrian business cycle theory is pretty good.
All these books are useful for driving home key points about how we have arrived in our current pass. Schlichter, precisely because he used to work in the investment management business for so long, speaks not as an ivory tower academic, but as someone who has been on the practical side of finance. He knows that much of what appears to be "free market banking" is anything but; in fact, as he describes it, much of what now goes on in Wall Street, the City or wherever is a hybrid of market and state planning. In its way, it is profoundly corrupt. Schlichter also mentions how such a large chunk of the economics profession is locked into the philosophy that drives the current system - without it, many of these people would have to do something else for a living.
Perhaps the scariest part of his book is when Schlichter points out that the derangement of the capital system in the West is worse than in the late 1970s, when the-then Fed chairman, Paul Volcker, pushed up interest rates to record highs to purge some of the malinvestment and rottenness from the system. The cigar-chomping Volcker was a brave man, and he had the support of the-then presidents Carter and Reagan (Carter sometimes needs more credit than he gets). I cannot see any such central banker now receiving such support for this sort of thing. Instead, we've got ourselves "Helicopter Ben".
Paper Money Collapse is one of the best books to come out of the financial crisis, maybe the best so far.
What I will say is that the author goes into great detail to make the logic he uses understandable. He also references his sources very well. If a person disagrees with the author, it will take very good logic to do so.
That is what I like about this book. It lays out the authors ideas in a very logical fashion and the reader is left to either agree or disagree. There is not any hype or scare tactics used, just straightforward logical explanation based on the Austrian economics school of thought. I found the book very interesting and I think that even if a person does not agree with the authors premise and logic, it will cause those who believe in more mainstream economics to further clarify their own thoughts on the subject and will be of value to their thought process. Therefore, I think anyone who is interested in economics and the current economic situation we find ourselves in will find the book of great value, even if in the end they disagree with what the author has to say.
Is society made better off by giving control over its medium of exchange - our communication mechanism to our fellow human beings about our desires for goods and services - to a single organization, and then giving that organization our consent to create additional units of that medium at its sole discretion, using them to purchase whatever it wants from whoever it wants to?
That's the system we have today. All over the world. The author argues, and offers proof that convinced me, that the answer to that question is a resounding "No!"
But you can't beat something with nothing, so the author also makes a convincing argument that using a commodity with certain properties is our best choice - best in the sense of doing what money is supposed to do: communicate clearly to our fellow human beings what goods and services we desire - for a medium of exchange.
I urge you to read the book and think about its arguments. As our system lurches towards its endgame, you would be wise to be armed with an understanding of how we got here and what we can do about it.
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HOWEVER, the writer never mentions the concept of the "velocity of money" and he doesn't draw a...Read more