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The Death of Paper Money

Posted By admin On July 26, 2010 @ 5:03 am In Commentary | Comments Disabled

Ambrose Evans-Pritchard
London Telegraph [1]
July 26, 2010

As they prepare for holiday reading in Tuscany, City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974.

Ebay is offering a well-thumbed volume of “Dying of Money: Lessons of the Great German and American Inflations” at a starting bid of $699 (shipping free.. thanks a lot).

The crucial passage comes in Chapter 17 entitled “Velocity”. Each big inflation — whether the early 1920s in Germany, or the Korean and Vietnam wars in the US — starts with a passive expansion of the quantity money. This sits inert for a surprisingly long time. Asset prices may go up, but latent price inflation is disguised. The effect is much like lighter fuel on a camp fire before the match is struck.

People‚Äôs willingness to hold money can change suddenly for a “psychological and spontaneous reason” , causing a spike in the velocity of money. It can occur at lightning speed, over a few weeks. The shift invariably catches economists by surprise. They wait too long to drain the excess money.

Full article here [1]

The Death of Paper Money 080610banner4 [2]

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URLs in this post:

[1] London Telegraph: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7909432/The-Death-of-Paper-Money.html

[2] Image: http://www.thefallofamerica.net/

[3] Paper Money Madness: Inflation-Fueled Economic Growth Does Not Indicate That An Economy Is Getting Stronger: http://www.prisonplanet.com/paper-money-madness-inflation-fueled-economic-growth-does-not-indicate-that-an-economy-is-getting-stronger.html

[4] Paper Money Madness: Inflation-Fueled Economic Growth Does Not Indicate That An Economy Is Getting Stronger: http://www.prisonplanet.com/paper-money-madness-inflation-fueled-economic-growth-does-not-indicate-that-an-economy-is-getting-stronger-2.html

[5] Paper Money May Be Hurting Your Health, As Well As Your Wealth: http://www.prisonplanet.com/paper-money-may-be-hurting-your-health-as-well-as-your-wealth.html

[6] The Velocity of Money Is Coming, Along With Big Price Inflation?: http://www.prisonplanet.com/the-velocity-of-money-is-coming-along-with-big-price-inflation.html

[7] Future Money Trends: Paper Price Suppression Has Made Silver the Biggest Buy Ever: http://www.prisonplanet.com/future-money-trends-paper-price-suppression-has-made-silver-the-biggest-buy-ever.html

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