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A couple of months ago I was tipped off to this book "Monetary Regimes and Inflation" by Peter Bernholz. h/t @TuurDemeester
This will be a quick summary of my notes.
1/n
This will be a quick summary of my notes.
1/n
“There has never occurred a hyperinflation in history which was not caused by a huge budget deficit of the state.”
This makes sense but was not immediately obvious before reading this book. 2/n
This makes sense but was not immediately obvious before reading this book. 2/n
Gov’ts have an inherent bias towards inflation. Benefits outlaid have to be specific (so they are perceived by voters who will then re-election said officials), but cost can be spread widely (to all holders of the currency).
Duh.
Duh.
Full inflationary cycle: “First the paper money with no intrinsic value is introduced. This money is initially fully convertible at a fixed rate… into metallic currency whose intrinsic value corresponds to its face value. These paper notes are welcome to most people b/c... 4/n
... they are not as heavy and are easier to store and to transport (first phase). But with more and more of the paper money issued, convertibility becomes difficult, since official reserves dwindle (second phase), and may no longer be expected... 5/n
... Then the bad money begins to drive out the good (third phase). Finally, when just about all the good money has vanished, the exchange rate can no longer be kept fixed, and the good money drives out bad.” 6/n
"During hyperinflations, capital markets are usually reduced in scope and especially duration."
Credit and capital markets are vital to G7 economies, and I wonder if even a moderate inflation might have a devastating chilling effect on those markets.
Credit and capital markets are vital to G7 economies, and I wonder if even a moderate inflation might have a devastating chilling effect on those markets.
"During hyperinflation, ironically, low-skill laborers tend to be better off as they can reprice their labor more quickly compared to higher-paid jobs and especially gov’t employees."
Shall we call this "Curse of the Cantillon Insider"?
Shall we call this "Curse of the Cantillon Insider"?
On how to make paper money as good as gold:
“Men would have to be capable of unlimited self-discipline to resist any temptation to increase money arbitrarily, even if their very existence, or that of the state, we’re at stake." - Adolph Wagner
Translation: Never gonna happen.
“Men would have to be capable of unlimited self-discipline to resist any temptation to increase money arbitrarily, even if their very existence, or that of the state, we’re at stake." - Adolph Wagner
Translation: Never gonna happen.
“Inflation can only be absent in the long run if the hands of the rulers are bound by an adequate monetary regime or constitution.”
Or... a non-sovereign, decentralized hard money?
Or... a non-sovereign, decentralized hard money?
Environments favorable for the introduction of sound monetary regimes:
“Political pressure.. [arising because] the population compares the unfavorable performance of its own currency with that of a more stable [sound] currency.”
Basically, people need to demand better money!
“Political pressure.. [arising because] the population compares the unfavorable performance of its own currency with that of a more stable [sound] currency.”
Basically, people need to demand better money!
It's said that we collectively "get the politicians we deserve". Maybe it's also true that we "get the quality of money we deserve".
Demand Better Money.
/Fin
Demand Better Money.
/Fin
