Paper Money Collapse The Folly of Elastic Money and the Coming Monetary Breakdown

Author: Detlev S. Schlichter
Publisher: John Wiley & Sons
ISBN: 9781118095751
Published In: August 2011
Format: Hardback , 288 pages
Jurisdiction: International ? Disclaimer:
Countri(es) stated herein are used as reference only

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The case for the inevitable failure of a paper money economy and what that means for the future

All paper money systems in history have ended in failure. Either they collapsed in chaos, or society returned to commodity money before that could happen. Drawing upon novel new research, Paper Money Collapse conclusively illustrates why paper money systems—those based on an elastic and constantly expanding supply of money as opposed to a system of commodity money of essentially fixed supply—are inherently unstable and why they must lead to economic disintegration.

These highly controversial conclusions clash with the present consensus, which holds that elastic state money is superior to inflexible commodity money (such as a gold standard), and that expanding money is harmless or even beneficial for as long as inflation stays low. Contradicting this, Paper Money Collapse shows that:

The present crisis is the unavoidable result of continuously expanding fiat money
The current policy of accelerated money production to "stimulate" the economy is counterproductive and could lead to a complete collapse of the monetary system
Why many in financial markets, in media, and in the policy establishment are unable (and often unwilling) to fully appreciate the underlying problems with elastic money

This compelling new book looks at the breakdown of modern economic theory and the fallacy of mathematical models. It is an analysis of the current financial crisis and shows in very stark terms that the solutions presented by paper money-enthusiasts around the world are misguided and inherently flawed.

Foreword xi

Acknowledgments xv

Prologue: The Brave New World of Elastic Money 1

Part One: The Basics of Money 19

Chapter 1: The Fundamentals of Money and Money Demand 21

Chapter 2: The Fundamentals of Fractional-Reserve Banking 49

Part Two: The Effects of Money Injections 83

Chapter 3: Money Injections without Credit Markets 85

Chapter 4: Money Injections via Credit Markets 97

Part Three: Fallacies about the Price Level and Price Level Stabilization 125

Chapter 5: Common Misconceptions Regarding the Price Level 127

Chapter 6: The Policy of Stabilization 149

Part Four: History of Paper Money: A Legacy of Failure 161

Chapter 7: A Brief History of State Paper Money 163

Part Five: Beyond the Cycle: Paper Money Collapse 171

Chapter 8: The Benefi ciaries of the Paper Money System 173

Chapter 9: The Intellectual Superstructure of the Present System 185

Chapter 10: Beyond the Cycle: Paper Money’s Endgame 221

Epilogue: A Return to Commodity Money 241

Notes 247

About the Author 259

Index 261

DETLEV S. SCHLICHTER is a writer and Austrian school economist who has spent nearly twenty years working in international finance, including stints at Merrill Lynch, J.P. Morgan, and Western Asset Management. In his career, Schlichter has overseen billions in assets for institutional clients around the globe.