Synopses & Reviews
Praise for PAPER MONEY COLLAPSE
SECOND EDITION“A brilliant treatise on the fundamentals of sound money and the destructive deviations of contemporary Keynesian central banking. Sophisticated, readable, thorough, and persuasive.”
—David Stockman
“Paper Money Collapse was essential reading when the first edition appeared in 2011 and it is even more essential reading now. Not only has the underlying degree of global monetary instability continued to increase; Detlev Schlichter has now updated his original, excellent tome to incorporate contemporary developments, including the introduction of so-called ‘cryptocurrencies’ such as bitcoin, and he explores several plausible scenarios for the future of the faltering global monetary order. Readers will benefit from these insights, presented as they are in a highly readable, cogent style.”
—John K. Butler, author of The Golden Revolution and publisher of the Amphora Report investment newsletter
“A passionate, engaging, and depressing analysis of the approaching fiat money endgame.”
—Kevin Dowd, Durham University
“Detlev Schlichter’s book Paper Money Collapse, Second Edition develops a concise, clear, and at the same time deep economic analysis on the current elastic monetary system and why it is essentially incompatible with a free market economy. I strongly recommend this book to anyone interested in financial crises, economic recessions, and the future of capitalism.”
—Jesús Huerta de Soto, Professor of Political Economy, King Juan Carlos University (Madrid); author of Money, Bank Credit, and Economic Cycles
“Stumbling forward under the baleful influence of wishful thinking, the world’s politicians and central bankers are blundering down just the path Detlev set out in his first edition. With the Austrian measure of the UK money supply now increasing by over 12% year on year, I expect Detlev’s masterpiece to be increasingly relevant.”
—Steve Baker, Conservative MP for Wycombe, Member of the House of Commons Treasury Select Committee, and a co-founder of the Cobden Centre
“Detlev’s understanding and insight into central bank policy propelled him to being one of the world’s preeminent global bond managers. He cuts through the fog of central bank mystery by providing a clear description of their apparatus and methods. Going beyond the requisite professional skepticism, Detlev has trained his scholarly attention to highlighting the enormity of the potential further damage they may yet wreak on us.”
—Ken Leech, CIO, Western Asset Management Company
Synopsis
In an engaging style based on extensive research the new edition of
Paper Money Collapse shows conclusively why paper money systems - monetary systems that are based on an elastic and constantly expanding supply of money (such as our system today) as opposed to a system of commodity money of essentially fixed supply - are inherently unstable and why they must lead to economic disintegration. All paper money systems in history ended in failure. The book shows why this is the case and why it will also be the fate of the present system. The conclusions are controversial as they go against the present consensus, but shows that the present crisis is the unavoidable result of continuously expanding fiat money, that the current policy of accelerated money production to stimulate the economy is counterproductive and that, if pursued further, it will lead to a complete collapse of the monetary system.
The update will include:
- Newer developments and trends in the sphere of money and credit via statistics (e.g. growth in bank reserves; growth in debt outstanding)
- Further rounds of 'quantitative easing' by the Fed
- Recent difficulties of exiting from an ultra-easy policy stance
- The development of crypto-currencies, in particular Bitcoin
Paper Money Collapse, 2nd Edition looks at the breakdown of modern economic theory and the fallacy of mathematical models and makes the case for the inevitable failure of a paper money economy and what that means for the future.
Synopsis
Explore the inevitable collapse of the fiat monetary systemPaper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown, Second Edition challenges the mainstream consensus on money and monetary policy. While it is today generally believed that the transition from 'hard' and inflexible commodity money (such as a gold standard) to entirely flexible and potentially unlimited fiat money under national central banks allows for superior economic stability, Paper Money Collapse shows that the opposite is true. Systems of highly elastic and constantly expanding money are not only unnecessary, even for growing economies, they are always extremely destabilizing. Over time, they must lead to substantial imbalances, including excessive levels of debt and distorted asset prices, that will require ever faster money production to sustain. Ultimately, however, there is no alternative to a complete liquidation of these distortions. Based on insights of many renowned economists and in particular of the Austrian School of Economics, the book explains through rigorous logic and in precise language why our system of flexible fiat money is incompatible with a market economy and therefore unsustainable. Paper money systems have always led to economic disintegration—without exception—throughout history. It will not be different for our system and we may be closer to the endgame than many think.
The updated second edition incorporates:
- A new introduction and an extended outlook section that discusses various "endgames"
- Responses to criticisms, alternative views, and a critical assessment of 'solutions'
- Comments on recent policy trends, including attempts to exit the 'easy money' policy mode
- An evaluation of new crypto-currency Bitcoin
Paper Money Collapse: The Folly of Elastic Money, Second Edition clarifies the problem of paper money clearly and eloquently, and proposes multiple routes to a solution.
Synopsis
Now in its second edition, Detlev S. Schlichter’s bestselling
Paper Money Collapse: The Folly of Elastic Money challenges the mainstream thinking on money and monetary policy. This revised and updated edition draws on solid research and clearly demonstrates that the present monetary system, based as it is on essentially limitless fiat money and unconstrained central banking, is inherently unstable and ultimately unsustainable.
By the standards of history and theory, our present paper money system is a peculiar political creation. For centuries, the money of the free market was gold or silver, commodities whose supply was fairly inelastic and outside of the control of politicians, bureaucrats, and bankers. Capitalist money was hard and apolitical, and although banks have always added to the money supply by issuing banknotes and bank deposits, the free market kept strict limits on overall money production. This changed throughout the 20th century, as money became increasingly politicized and “elastic,” a process that culminated in the closing of the “gold window” in 1971 and the beginning of the era of limitless paper money and uninhibited central banking.
Most modern economists tell us that elastic money is a boon. If handled correctly, it can allow for faster growth and a more stable economy. In a brilliant analysis that captivates through rigorous logic and accessible language, Detlev Schlichter explains why the consensus is wrong. Elastic money is a source of instability and the ultimate cause of the growing deformations in all developed economies: ever growing debt levels, periodic asset bubbles, overextended and weak banks, and an intensifying dependency on cheap credit. Like all paper money systems in history, our system too will face the choice between a voluntary return to hard and apolitical money or accelerated money printing that will ultimately end in hyperinflation. The time to choose is now!
About the Author
DETLEV S. SCHLICHTER is an independent economist and investment strategist. He spent 19 years as a trader and portfolio manager in international financial markets, including stints at J.P. Morgan, Merrill Lynch, and Western Asset Management. In his career, Detlev has overseen billions in assets for institutional clients around the globe. He is a frequent commentator on economics and financial markets via his website detlevschlichter.com. Detlev lives with his wife and three children in Hampstead, London.
Table of Contents
Foreword
Acknowledgments
Prologue: Contra the Mainstream Consensus – What this book is about
The Ruling Mainstream Consensus on Money
The Growth-versus-inflation Trade Off
What This Book Will Show
Understanding Our Fiat Money System
What is Different from the First Edition?
Support from Eminent Economists
Notes
Part One: The Basics of Money
Chapter 1 The Fundamentals of Money and Money Demand
The Origin and Purpose of Money
An Anthropologist’s Challenge
What Gives Money Value?
(Almost) Any Quantity of Money Will Do
The Demand for Money
Are “Sticky” Prices a Problem?
Other Functions of Money
The Unique Position of the Paper Money Producer
The Monetary Asset versus Other Goods
Notes
Chapter 2 The Fundamentals of Fractional-Reserve Banking
The Origin and Basics of Fractional-Reserve Banking
Who Owns “Deposited” Money?
Exposing Misconceptions about Fractional-Reserve Banking
“Free Banking” is Limited Banking
Summary of Part One
Notes
Part Two: The Effects of Money Injections
Chapter 3 Money Injections without Credit Markets
Even, Instant, and Transparent Money Injection
Even and Nontransparent Money Injection
Uneven and Nontransparent Money Injection
Notes
Chapter 4 Money Injections via Credit Markets
Consumption, Saving, and Investing
Interest
Interest Rates are Not Determined by Factor Productivity
Money Injection via the Loan Market
The Process in More Detail
Policy Implications of the Austrian Theory
Addendum: Gordon Tullock’s Critique of the Austrian Business Cycle Theory and some words on “forced saving”
An Example: U.S. Housing Boom and Bust
Summary of Part Two
Notes
Part Three: Fallacies about the Price Level and Price Level Stabilization
Chapter 5 Common Misconceptions Regarding the Price Level
The Fallacy that a Stable Price Level Means “Neutral” Money
The Fallacy that Hard Money is Unstable Money, Part 1 - History
The Fallacy that Hard Money is Unstable Money, Part 2 - Theory
Notes
Chapter 6 The Policy of Stabilization
Problems with Price Index Stabilization
Addendum: The “Free Bankers” and the Theory of Immaculate Fractional-Reserve Banking
Summary of Part Three
Notes
Part Four: A History of Paper Money and How We Got to Where We Are Now
Chapter 7 A Legacy of Failure
Paper Money Experiments
1914 - 2014 - A Century of Monetary Decay
Notes
Part Five: Beyond the Cycle - Paper Money’s Endgame and The Future of Money
Chapter 8 The Beneficiaries of the Paper Money System
Paper Money and the Banks
Paper Money and the State
Paper Money and the Professional Economist
Notes
Chapter 9 The Intellectual Superstructure of the Present System
The Alternative View: Individualism and Laissez-Faire
The Mainstream View: Collectivism and Interventionism
The Political Appeal of Mainstream Macroeconomics
The Myth That Everybody Benefits from “Stimulus”
Monetarism as Monetary Interventionism
The Savings Glut Theory and the Myth of Underconsumption and Underinvestment
Inflationism and International Policy Coordination
Notes
Chapter 10 Endgames - Inflationary Meltdown or Return to Hard Money?
Paper Money Collapse
Alternatives: Return to Hard Money
A Return to a Gold Standard
The Separation of Money and State
Bitcoin - Money of No Authority
Notes
Epilogue: Money, Freedom, and Capitalism
About the Author
Index