Wednesday, 7 September 2011

Are you ready for the paper money collapse [updated]

Stimulus was supposed to reduce unemployment. But all it did was produce whopping deficits and a once-in-a-lifetime expansion of debt.

 As bad as America’s situation is post-stimulus, Europe’s is worse.  Stock and bond markets are just starting to realise that, as European banks face collapse under debts. It’s like 2008 all over again—but this time with a new depression recession inside  the existing one.

The power governments have to print money is killing us. The power governments have given banks to create credit out of thin air   is killing us.

Detlev Schlichter was, until last year, employed as the Head of Fixed Interest at the London office of WAMCO—i.e., Western Asset Management Company, one of the world's leading fixed income managers. Previous to that he was their European Fixed Interest Portfolio Manager. In other words he knows what he is talking about. 

And he is worried.  He is convinced that our historically unprecedented forty-year experiment with paper money is over. Indeed, he left WAMCO last year to write a book titled Paper Money Collapse.

A crisis can no longer be prevented [he says], and in any case, politicians are not listening. Try and protect yourself. That's the only sensible thing to do.

And as paper money loses its value by the day, his views and those like them are going mainstream. Here he is on Reuters the other day (and you don’t get more mainstream than Reuters) putting a timeframe on the collapse. [Click through for the interviews. NOTE: At the 2.05 minute mark you need to click play again as the video will pause for some reason.]

Detlev Sclichter interviewed on Reuters television

Detlev Schichter interviewed on Reuters Television - click image to view interview.

Second half of interview here:

Screenshot of Detlev Schlichter interviewed on Reuters

Second half of Detlev Schlichter on Reuters Television

3.      If you get time have a listen to him talk here. This is the first part of five so click on additional links if you want to hear more.

And if Reuters isn’t mainstream enough for you, here’s the Gold Standard discussed on CNBC—CNBC for Chrissake!—with participants who almost (in the absence of some sound history of the nineteenth-century) know what they’re talking about.

UPDATE: There is no way out: Why policy advice is futile, and what you should do instead.


  1. "Paper" money is fine, but not when it's run by dilutionary self-dealing kleptocratic big spenders of opm with electorates voting decade after decade for more Big Brother spending and confiscation.

    Gold is fine for found-wealth societies who have trouble with abstract wealth creation values, but it's the 21st century now and it's time to leave Aztec values in the past.

    The article is focusing on a minor issue - currency dilution, when the vast problem is government budgets funding unproductive activity using confiscated funds boosted with borrow and hope loans.

  2. @Maurice: "... not when it's run by dilutionary self-dealing kleptocratic big spenders ..."

    But that's who it's always run by. That's the point of a commodity money: that it can't simply be expanded by printing new pieces of paper.

    Further, your history is in error. In fact, the Aztecs didn't value gold as money. It was their Spanish conquerors who did.

    And far from being a "barbarous relic," gold was actually the money on which the Industrial Revolution was built. It was the commodity money on which the prosperity of the nineteenth century was built--growth WITHOUT price inflation--the last half-century of which was the longest peacetime period in history.

    The article actually focuses on a major issue: that the experiment with paper money, and the consequent dilution of money's purchasing power, is at the root of so many of the twentieth century's economic disaster's--not least in the current crisis (both in cause and consequence) where it now it allows governments to think it is they from whom resources flow; and that borrowing newly-minted money is something they can do as long as the printing presses stay upright.


1. Commenters are welcome and invited.
2. All comments are moderated. Off-topic grandstanding, spam, and gibberish will be ignored. Tu quoque will be moderated.
3. Read the post before you comment. Challenge facts, but don't simply ignore them.
4. Use a name. If it's important enough to say, it's important enough to put a name to.
5. Above all: Act with honour. Say what you mean, and mean what you say.