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The Death of Paper Money
Posted By admin On July 26, 2010 @ 5:03 am In Commentary | Comments Disabled
London Telegraph 
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’s 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.
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URLs in this post:
 London Telegraph: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7909432/The-Death-of-Paper-Money.html
 Image: http://www.thefallofamerica.net/
 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
 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
 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
 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
 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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