22 May 2009

A pandemic of paper money ~ Schoon

This time the deflationary depression will be accompanied by an extraordinary global currency crisis. Government attempts to reflate their deflating economies will instead give rise to additional massive economic distress.

Just as low 1 % interest rates reflated economies in 2002 but also caused property prices to balloon then collapse in 2006, today’s even lower 0.25 % rates coupled with today’s unprecedented monetary creation will create an unmitigated global currency disaster that will destroy money as we know it.

To stimulate deflating economies, so much fiat money is being printed that money will eventually become worthless. Throughout history this is how all fiat currencies have ended, in the uncontrolled printing and circulation of increasing amounts of increasingly worthless paper.

Last month, M-2, the monetary aggregate in Japan increased at a rate even greater than 100 % annually. The printing presses are now being run as never before in the US, the UK and Japan in the desperate hope that it will save them from the overwhelming gravitational pull of deflation, an economic black hole of immense inertia.

The borrowing, printing and circulating of excessive amounts of fiat money has been done before and does not work. Doing so is a recipe for disaster; albeit a time-honored recipe that has been tried in the past always with the same result.

It will be no different this time. If you think otherwise, just wait and see.


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