Paper Money Collapse

DETLEV S. SCHLICHTER is an independent economist and investment strategist. He spent 19 years as a trader and portfolio manager in international financial markets, including stints at J.P. Morgan, Merrill Lynch, and Western Asset Management. In his career, Detlev has overseen billions in assets for institutional clients around the globe. He is a frequent commentator on economics and financial markets via his website detlevschlichter.com. Detlev lives with his wife and three children in Hampstead, London.

• Foreword xiiiAcknowledgments xviiPrologue Contra the Mainstream Consensus—What This Book Is About 1The Ruling Mainstream Consensus on Money 2The Growth-versus-Inflation Trade-Off  7What This Book Shows 8Understanding Our Fiat Money System 11What Is Different from the First Edition? 14Support from Eminent Economists 19A Note on Pronouns in the Text 20Notes 21Part One The Basics of MoneyChapter 1 The Fundamentals of Money and Money Demand 25The Origin and Purpose of Money 26An Anthropologist’s Challenge 29What Gives Money Value? 34(Almost) Any Quantity of Money Will Do 36The Demand for Money 38Are “Sticky” Prices a Problem? 42Other Functions of Money 46The Unique Position of the Paper Money Producer 51The Monetary Asset versus Other Goods 54Notes 61Chapter 2 The Fundamentals of Fractional-Reserve Banking 65The Origin and Basics of Fractional-Reserve Banking 69Who Owns “Deposited” Money? 74Exposing Misconceptions about Fractional-Reserve Banking 77“Free Banking” Is Limited Banking 83Summary of Part One 87Notes 89Part Two The Effects of Money InjectionsChapter 3 Money Injections without Credit Markets 95Even, Instant, and Transparent Money Injection 95Even and Nontransparent Money Injection 98Uneven and Nontransparent Money Injection 102Notes 107Chapter 4 Money Injections via Credit Markets 109Consumption, Saving, and Investing 110Interest 111Interest Rates Are Not Determined by Factor Productivity 113Money Injection via the Loan Market 119The Process in More Detail 120Policy Implications of the Austrian Theory 130Addendum: Gordon Tullock’s Critique of the Austrian Business Cycle Theory and Some Words on “Forced Saving” 133An Example: U.S. Housing Boom and Bust 143Summary of Part Two 150Notes 154Part Three Fallacies about the Price Level and Price-Level StabilizationChapter 5 Common Misconceptions Regarding the Price Level 159The Fallacy That a Stable Price Level Means “Neutral” Money 160The Fallacy That Hard Money Is Unstable Money, Part 1—History 164The Fallacy That Hard Money Is Unstable Money, Part 2—Theory 170Notes 179Chapter 6 The Policy of Stabilization 181Problems with Price Index Stabilization 181Addendum: The “Free Bankers” and the Theory of Immaculate Fractional-Reserve Banking 187Summary of Part Three 193Notes 195Part Four A History of Paper Money and How We Got to Where We Are NowChapter 7 A Legacy of Failure 199Paper Money Experiments 2011914–2014: A Century of Monetary Decay 206Notes 215Part Five Beyond the Cycle: Paper Money’s Endgame and the Future of MoneyChapter 8 The Beneficiaries of the Paper Money System 221Paper Money and the Banks 223Paper Money and the State 225Paper Money and the Professional Economist 231Notes 234Chapter 9 The Intellectual Superstructure of the Present System 235The Alternative View: Individualism and Laissez-Faire 237The Mainstream View: Collectivism and Interventionism 241The Political Appeal of Mainstream Macroeconomics 244The Myth That Everybody Benefits from “Stimulus” 247Monetarism as Monetary Interventionism 250The Savings Glut Theory and the Myth of Underconsumption and Underinvestment 253Inflationism and International Policy Coordination 259Notes 265Chapter 10 Endgames—Inflationary Meltdown or Return to Hard Money? 269Paper Money Collapse 270Alternatives: Return to Hard Money 277A Return to a Gold Standard 278The Separation of Money and State 284Bitcoin—Money of No Authority 288Notes 300Epilogue Money, Freedom, and Capitalism 303About the Author 309Index 311