You are previewing Paper Money Collapse: The Folly of Elastic Money, 2nd Edition.
O'Reilly logo
Paper Money Collapse: The Folly of Elastic Money, 2nd Edition

Book Description

Explore the inevitable collapse of the fiat monetary system

Paper Money Collapse: The Folly of Elastic Money, Second Edition challenges the mainstream consensus on money and monetary policy. While it is today generally believed that the transition from 'hard' and inflexible commodity money (such as a gold standard) to entirely flexible and potentially unlimited fiat money under national central banks allows for superior economic stability, Paper Money Collapse shows that the opposite is true. Systems of highly elastic and constantly expanding money are not only unnecessary, even for growing economies, they are always extremely destabilizing. Over time, they must lead to substantial imbalances, including excessive levels of debt and distorted asset prices, that will require ever faster money production to sustain. Ultimately, however, there is no alternative to a complete liquidation of these distortions. Based on insights of many renowned economists and in particular of the Austrian School of Economics, the book explains through rigorous logic and in precise language why our system of flexible fiat money is incompatible with a market economy and therefore unsustainable. Paper money systems have always led to economic disintegration—without exception—throughout history. It will not be different for our system and we may be closer to the endgame than many think.

The updated second edition incorporates:

  • A new introduction and an extended outlook section that discusses various "endgames"

  • Responses to criticisms, alternative views, and a critical assessment of 'solutions'

  • Comments on recent policy trends, including attempts to exit the 'easy money' policy mode

  • An evaluation of new crypto-currency Bitcoin

  • Paper Money Collapse: The Folly of Elastic Money, Second Edition clarifies the problem of paper money clearly and eloquently, and proposes multiple routes to a solution.

    Table of Contents

    1. Foreword
    2. Acknowledgments
    3. Prologue: Contra the Mainstream Consensus—What This Book Is About
    4. Part One: The Basics of Money
      1. Chapter 1: The Fundamentals of Money and Money Demand
        1. The Origin and Purpose of Money
        2. An Anthropologist’s Challenge
        3. What Gives Money Value?
        4. (Almost) Any Quantity of Money Will Do
        5. The Demand for Money
        6. Are “Sticky” Prices a Problem?
        7. Other Functions of Money
        8. The Unique Position of the Paper Money Producer
        9. The Monetary Asset versus Other Goods
        10. Notes
      2. Chapter 2: The Fundamentals of Fractional-Reserve Banking
        1. The Origin and Basics of Fractional-Reserve Banking
        2. Who Owns “Deposited” Money?
        3. Exposing Misconceptions about Fractional-Reserve Banking
        4. “Free Banking” Is Limited Banking
        5. Summary of Part One
        6. Notes
    5. Part Two: The Effects of Money Injections
      1. Chapter 3: Money Injections without Credit Markets
        1. Even, Instant, and Transparent Money Injection
        2. Even and Nontransparent Money Injection
        3. Uneven and Nontransparent Money Injection
        4. Notes
      2. Chapter 4: Money Injections via Credit Markets
        1. Consumption, Saving, and Investing
        2. Interest
        3. Interest Rates Are Not Determined by Factor Productivity
        4. Money Injection via the Loan Market
        5. The Process in More Detail
        6. Policy Implications of the Austrian Theory
        7. Addendum: Gordon Tullock’s Critique of the Austrian Business Cycle Theory and Some Words on “Forced Saving”
        8. An Example: U.S. Housing Boom and Bust
        9. Summary of Part Two
        10. Notes
    6. Part Three: Fallacies about the Price Level and Price-Level Stabilization
      1. Chapter 5: Common Misconceptions Regarding the Price Level
        1. The Fallacy That a Stable Price Level Means “Neutral” Money
        2. The Fallacy That Hard Money Is Unstable Money, Part 1—History
        3. The Fallacy That Hard Money Is Unstable Money, Part 2—Theory
        4. Notes
      2. Chapter 6: The Policy of Stabilization
        1. Problems with Price Index Stabilization
        2. Addendum: The “Free Bankers” and the Theory of Immaculate Fractional-Reserve Banking
        3. Summary of Part Three
        4. Notes
    7. Part Four: A History of Paper Money and How We Got to Where We Are Now
      1. Chapter 7: A Legacy of Failure
        1. Paper Money Experiments
        2. 1914–2014: A Century of Monetary Decay
        3. Notes
    8. Part Five: Beyond the Cycle: Paper Money’s Endgame and the Future of Money
      1. Chapter 8: The Beneficiaries of the Paper Money System
        1. Paper Money and the Banks
        2. Paper Money and the State
        3. Paper Money and the Professional Economist
        4. Notes
      2. Chapter 9: The Intellectual Superstructure of the Present System
        1. The Alternative View: Individualism and Laissez-Faire
        2. The Mainstream View: Collectivism and Interventionism
        3. The Political Appeal of Mainstream Macroeconomics
        4. The Myth That Everybody Benefits from “Stimulus”
        5. Monetarism as Monetary Interventionism
        6. The Savings Glut Theory and the Myth of Underconsumption and Underinvestment
        7. Inflationism and International Policy Coordination
        8. Notes
      3. Chapter 10: Endgames—Inflationary Meltdown or Return to Hard Money?
        1. Paper Money Collapse
        2. Alternatives: Return to Hard Money
        3. A Return to a Gold Standard
        4. The Separation of Money and State
        5. Bitcoin—Money of No Authority
        6. Notes
    9. Epilogue: Money, Freedom, and Capitalism
    10. About the Author
    11. Index
    12. End User License Agreement