Broad Oak: your emotional support animal

Saturday, January 31, 2009

Money and life

The previous post is a summary of Brad Setser's views on China and the dollar. What with the oil price coming down and the trade deficit reducing because of declining demand, it seems reassuring for Americans. But Michael Panzner also returns to one of his themes, the inflationary phase that he (and many others) fear may succeed the recession-depression.

Marc Faber has observed that this is the first time in history that economies around the world are affected simultaneously, since we are now much more inter-connected. So if inflation should take hold, perhaps it will not be fully reflected in the exchange rates - it might be that the dollar remains relatively buoyant against the pound, Euro, renminbi etc.

So maybe the real victims of global inflation, or hyperinflation, will not be this nation or that, but cash savers as a class. They have set aside some of the rewards of work, instead of spending it, and will come back to the cupboard to find it turned half-rotten, as happened in the 70s (if they'd put it in the stockmarket instead, it would only have been a bit mouldy).

How is it that China can award death sentences to those who adulterate milk with melamine, but adulterating the currency - the accumulation of millions of years of human labour - is not even punishable by loss of office? In the year George Washington took Presidential Office, "coining" in England was treason, and perpetrators were accordingly hanged, drawn and quartered (or, in the case of women, burned).

Money is stored life, and devaluing money is stealing life. Next month will be the 20th anniversary of my becoming a financial adviser, and the people I have advised would mostly not bother with investments if only their cash savings could hold their real value. What a scam this all is.

1 comment:

Gary said...

I suspect that eventually society will come "full-circle" and will once again eschew debt and revile counterfeiting or debasing currencies. Unfortunately, it will probably take several generations to occur and will likely involve the establishment of new forms of government.

Regarding milk, if that were to occur in the United States, most likely the worst punishment would be a fine or a civil judgment. We have a lot of problems, don't we? Unfortunately, things will get much worse before they ever get better. Most Americans don't even realize what is happening, yet.