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Customer Review

4 of 5 people found the following review helpful
2.0 out of 5 stars Promising start, underwhelming from chapter 10 onwards, 20 Jan. 2014
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This review is from: How an Economy Grows and Why It Crashes: Two Tales of the Economy (Hardcover)
The book aims to explain macroeconomics using a simplified island economy as a model. This is very well done, especially in the early chapters in order to explain the dynamics of consumption vs investment and resulting productivity gains.

Unfortunately the model has al flaw in that it does not replicate the monetary system adequately. In the real world the money supply (cash plus deposits) is largely determined by commercial banks making loans (and thereby creating deposits) as they wish, regardless of the underlying base money (cash plus CB reserves) and without ANY gold backing. The crucial points are that debt = money and so a deleveraging results in a contraction of the money supply and related recessionary hoarding effects and that QE mainly impacts base money but not necessarily the money supply which would be more inflationary.

The simplified model used in the book is based on an outdated monetary system (gold backing + state control of the money supply) and is therefore not sophisticated enough to illuminate on current inflationary dynamics and make sensible predictions about the future. This is a shame given the promising start and the importance of the topic.

You would have thought that someone who has been warning of hyperinflation for the past three years and published several books would have done their homework.
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Initial post: 5 Jan 2015 19:29:31 GMT
Last edited by the author on 5 Jan 2015 19:32:07 GMT
Muse says:
Excellent review, C Herrmann.

I've not come across any book in over 20 years of reading economics that specifically shows the relationship between money creation and economic activity - especially the 97% debt money in circulation that we have from this fraudulent money creation by private banks.

Economics that includes and describes the effects of this global debt money, which has caused the greatest economic crises in the last 100 or more years, is missing from all college and university education. The knowledge of this money creation has been purposefully left out of the curricula, either because most economists of political influence don't want it made known, or because they are completely clueless (ignorant!) of its relevance. This money is the invisible "elephant in the room" of economics.

Also, money should never be commodified, whether gold or paper. Most people create wealth; money is not wealth. Wealth is only produced by labour on land (including the use of its minerals and buildings, which are derived from land). I recommend readers read the book (or look at its equivalent DVD) called the "Four Horsemen" [ISBN-10: 0956398510]
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