Money and the theory of exchange
Through a combination of economic theory and empirical evidence, it is easy to establish that changes in our economic condition will prove to turn negative in the next few years. We cannot with certainty establish the timing and scale; that is the province of informed speculation. But we do know that a cycle of credit always terminating in a periodic crisis exists and we can explain why. We know that it is a repetitive cycle of events, a new crisis is now due, and the misuse of money is at the centre of it.
This time, the negative forces are unquestionably more violent than last time, threatening not just a recession, but something considerably more vicious. And anticipating, which we can do with total certainty, the statists’ monetary response to what we now know to be a forthcoming event, we can also say it will be met with a new wave of monetary expansion. The precedent was set by the Lehman crisis, when the greatest coordinated injection of money in the history of central banking was undertaken by the major central banks to buy off the consequences of previous monetary expansions. This one threatens to be even larger.
Consequences begat other consequences. But, by and large, they have not materialised in the form widely expected. Following Lehman, monetarists expected the purchasing power of currencies to decline in unison, and to a degree they did. How much they have declined becomes debatable, because government statistics try to measure the unmeasurable and fail to produce satisfactory answers. With respect to both economics and money, the problem for the ordinary person is further compounded by governments and their agencies acting like the three wise monkeys. They see no evil, hear no evil, speak no evil. And hey presto! There is no evil.
For a long time, those that determine what is best for us have been inhabiting another planet. They pursue economic and monetary policies that become more destabilising with each turn of the credit cycle. By statistical method they supress evidence of the consequences. Government finances benefited from the Lehman experiment with their expanding debt financed by the expansion of money and credit, which escalated with the interest cost conveniently suppressed. Government is all right Jack, so the little people, its electors, must be as well.
The forthcoming tsunami of money and credit, which if recent history is any guide, will be through quantitative easing, providing finance for worsening government deficits and supporting the banks they licence. The little people might take a different view of the consequences for state-issued currencies, as the debasement unfolds. This article anticipates that alternative view by explaining what money is, its validity, and how a state-issued currency differs from true money, in order to inform readers ahead of events instead of learning the lesson in retrospect...
