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Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown Hardcover – 23 Sep 2011


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Product details

  • Hardcover: 288 pages
  • Publisher: John Wiley & Sons; 1 edition (23 Sept. 2011)
  • Language: English
  • ISBN-10: 1118095758
  • ISBN-13: 978-1118095751
  • Product Dimensions: 16 x 2.5 x 23.5 cm
  • Average Customer Review: 4.4 out of 5 stars  See all reviews (17 customer reviews)
  • Amazon Bestsellers Rank: 397,659 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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Review

Paper Money Collapse was the 2012 getAbstract International Book Award Winner! ‘...An excellent introduction to the dangers of our current monetary system.′ (therealasset.co.uk, January 2012)

From the Inside Flap

The recent financial crisis has exposed the instability of our financial system. While there is plenty of talk of reform, few commentators are yet willing to consider that the root cause could be the transition from commodity money to limitless paper money, although the track record of paper money systems is uniformly discouraging: Throughout human history, all paper money systems have either collapsed in chaos, or society has returned to commodity money (usually based on gold) before a total currency disaster occurred. This book shows why this was the case and why this is also the choice we are facing today. Drawing upon ground breaking new research, Paper Money Collapse conclusively demonstrates 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, by their very nature, lead to economic disorder. These highly controversial findings clash with the general consensus that elastic state money is superior to inflexible commodity money, and that expanding money is harmless or even beneficial as long as inflation remains contained. In an engaging style based on extensive study and analysis, this compelling new book exposes the fallacies of mainstream macroeconomics and debunks erroneous conventional wisdom. It explains why many people working in financial markets, in the media, and in policy establishment positions are unable (and often unwilling) to fully appreciate the underlying problems with elastic money and the danger it presents. Paper Money Collapse shows in the starkest terms that the recent crisis is far from over and that the solutions presented by the advocates of paper money around the world are misguided and inherently flawed, in particular the current policy of accelerated paper money production to "stimulate" the economy. If these policies are continued, a complete currency catastrophe will be inevitable. An absolute must–read for economists, individual investors, and anyone with an interest in finance, Paper Money Collapse will change the way you think about our financial system—and about how to take control of your own financial future.

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Customer Reviews

4.4 out of 5 stars

Most Helpful Customer Reviews

57 of 59 people found the following review helpful By Mary Mountain on 18 Sept. 2011
Format: Hardcover
Schlicter's analysis is certainly controversial, and I must admit that I started reading Paper Money Collapse with a degree of scepticism. However, the logic of his argument is compelling and, upon concluding the read and reflecting, the reason behind many recent world economic events becomes evident. A good example is the inability of western economies such as Japan and the US to stimulate growth, despite repeated attempts at monetary expansion.

He begins with a clear explanation of what money is and how it works; how it began as a pure commodity currency, morphed into a paper currency backed by gold, changed again through the process of Fractional-Reserve Banking and has today (as it has in past times before collapsing) become a fiat currency where Central Banks can create money at will and at no cost. Currency created through Fractional-Reserve Banking is somewhat elastic and that created by Central Banks is infinitely so.

It is this elasticity that allows monetary expansion to distort and unbalance the economy, and to induce short term stimulus in certain sectors but zero real growth overall in the long term. It also has the important side effect of generating inflation. As the process continues monetary stimulus is destined to have less and less effect whilst the inflationary consequence is intensified, with the inevitable result of hyperinflation and currency collapse.

Schlicter underpins his analysis with descriptions of historic paper money systems, all of which failed. Our present system of paper money, particularly after 1971 when the US abandoned The International Gold Standard, displays numerous symptoms analogous to the historic examples cited.

What is the solution?
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31 of 32 people found the following review helpful By Brian Micklethwait on 15 Sept. 2011
Format: Hardcover
I agree with the bit on the cover of this book where it says that this is not an easy read. For me, it has not been, and not just because the truths Schlichter spells out and explains are so not-easy to take. I am a huge fan of his, and have been ever since I first heard him talk about the analysis in this book in London about a year ago, but he makes me work hard. This book is heavy on logical exposition, much lighter on diverting anecdote. For the latter sort of Schlichter stuff, you must read his blog.

One way to describe Paper Money Collapse might be to say that it is the sort of book that the great Austrian School economist and economic historian Murray Rothbard might have written, had he lived a bit longer. Last year I read Rothbard's Man, Economy and State. While doing this, I kept hoping that I would read a theoretical analysis of our current financial woes, as opposed merely to Rothbard's general take on Austrian Economics as a whole. I realise that this was a lot to ask of a book published several decades ago, and not surprisingly I was, although in general much educated, largely disappointed on that particular count. Well, what I was only hoping to read in that Rothbard book was what I did read in Detlev Schlichter's much shorter book, which I heartily recommend to anyone willing to really get stuck into it. Here is a conceptual analysis, in very much the painstaking Rothbard manner, of how non-commodity-backed currencies behave when they collapse, and why they do collapse, always, inevitably. In other words it is about the times we now live in.

I learned a lot from reading Paper Money Collapse.
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9 of 9 people found the following review helpful By Thomas H. Burroughes on 7 Oct. 2011
Format: Hardcover
This book is not comforting reading, nor is it always easy to read. You have to concentrate. But it is a "must-read". For me, one of the most valuable insights of this book is how it explains how the general price level in an economy can appear to be stable but that injections of fiat money into the system can derange relative prices for consumption, intermediate and production goods. This point is vital. It explains why those central banks, such as the Bank of England, got dangerously complacent in the 90s and noughties when the inflation targets they had been set appeared to behave. But all the while, the surges in money supply growth created a bloated financial sector and property market bubble.

He also rebuts the argument, sometimes used by opponents of commodity, or "inelastic" money, that a growing economy needs a growing supply of money to ensure stability. Untrue. At most, an expanding economy, with growing innovation, division of labour and productivity growth, should see a mild deflation over time (which is good for people who want to save by holding cash). But as Schlichter explains, there is no reason in logic or evidence why a mild price deflation should hamper economic progress once people get used to the idea that their money will buy a rising stock of goods and services through time. He uses the analogy of computers. In recent times, the hourly wages needed to buy, say, a mobile phone have slumped. Has that stopped people from going out and buying these devices? Of course not.

Schlichter's explanation of how fractional supply banking works is crystal clear and, in my view, he explains it slightly better than say, Murray Rothbard did in his The Mystery of Banking, although the latter book is still well worth reading.
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