Waypoints on The Road to Currency Destruction—And How to Avoid It
The comments below are an edited and abridged synopsis of an article by Alasdair Macleod
The few economists who recognize classical human subjectivity see the dangers of a looming currency collapse. It can be avoided by halting currency expansion and cutting government spending so that their budgets balance. No democratic government nor any of its agencies have the required mandate or conviction to act, so fiat currencies face ruin.
These are some waypoints to look for on the road to their destruction:
– Monetary policy will be challenged by rising prices and stalling economies. Central banks will almost certainly err on the side of accelerating inflationism in a bid to support economic growth.
– The inevitability of rising bond yields and falling equity markets that follows can only be alleviated by increasing QE, not tapering it. Look for official support for financial markets by increased QE.
– Central banks will then have to choose between crashing their economies and protecting their currencies or letting their currencies slide. The currency is likely to be deemed less important until it is too late.
– Realizing that it is currency going down rather than prices going up, the public rejects the currency entirely and it rapidly becomes valueless. Once the process starts, there is no hope for the currency.
Before considering these events, we must address the broader point about what the alternative to a fiat collapse will be: Cryptocurrencies led by Bitcoin, or the money people have always turned to when fiat has failed.
Up for discussion: Introduction; Bitcoin; why gold is under-owned and unappreciated; Basel 3 and the net stable funding ratio; the next waypoints in understanding inflation; summary and conclusions.
