Description:
Since the global financial crisis of 2008, the major governments of the world have resorted to printing vast sums of money to pay national debts and bail out banks. The warning signs are clear, and the collapse of the Zimbabwean dollar in 2009 after years of rampant money printing is a frightening example of what lies in store for the world’s economies if painful, but necessary, reform is not enacted soon. When Money Destroys Nations tells the gripping story of the disintegration of the once-thriving Zimbabwean economy and how ordinary people survived in turbulent circumstances.
Analysing this case within a global context, Philip Haslam and Russell Lamberti investigate the causes of hyperinflation and draw ominous parallels between Zimbabwe and the world’s developed economies. The looming currency crises and possible hyperinflation in these major economies, particularly the United States, have the potential to turn the current world order upside down. Zimbabwe’s lessons must not be ignored. This is the story of When Money Destroys Nations.

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Geredigeerde citaten uit When Money Destroys Nations.

Hyperinflation, simply explained, is extreme price inflation. Often referred to just as ‘inflation’, price inflation is a general increase in prices in the economy. Hyperinflation is essentially a period of economic chaos when confidence in the currency deteriorates markedly, leading to a rapid, chaotic and uncontrollable rise in the prices of goods and services, and the eventual collapse of confidence in the currency.

In formal academic literature, many economists try to pinpoint the rate of inflation that reveals when a country has definitively entered hyperinflation, but opinions vary wildly, from 100% to 12 874% per year.32 The specific thresholds are arbitrary and misleading. Practically speaking, hyperinflation isn’t a measured rate. It is a set of cultural states.

As a field for economic study, it is better to look at the critical qualitative changes in an economy, rather than randomly selected quantitative thresholds. These cultural changes are much more nuanced and yet have much better usefulness in describing the path of hyperinflation and analysing those countries that have gone down this path. Hence, this study has focused far more on these qualitative aspects of hyperinflation.

In fact, hyperinflation is never a moment. It is a collection of many critical points – a process. And while it has to do with prices rising, it is really the dramatic process of an established currency losing its usefulness as money.

Each stage of this process inflicts pain on the lives of communities in unique and debilitating ways, which together combine to form the dramatic process of hyperinflation.  ………….

However, to understand hyperinflation, one needs to understand inflation first. And to understand inflation, one needs to understand prices.
Prices are crucial signals. They direct all economic activity, coordinating the actions of millions of buyers, sellers and producers. Almost everything you possess or use is associated with a price: your salary, the food you eat, the place you live in. Interest rates and stock market values are prices.
Anything traded between a buyer and seller has a price. Even free stuff has a price – someone had to pay for it!

Money printing gives government great power.
Both those who control money printing and those who receive that money first are in a powerful position. If an unrestrained government decides to use its money printing privilege as a way to pay for its expenses, it can spend with limited direct accountability. It can manipulate how markets naturally and organically operate. And it can purchase real goods and services with newly printed money, acquiring more and more for itself at the expense of those who don’t have the special privilege of printing money.

If money is printed on an ongoing basis, inflation becomes a culturally accepted norm. In modern society, ask anyone if they think prices will be higher next year and you’ll get only one answer: of course.

Inflation makes people poorer.
The daily expenses of those who do not receive newly printed money early in the inflation process tend, on average, to rise faster than incomes. Money printing may appear to increase the amount of activity in an economy, but stealthily it makes economic conditions more difficult – most people find themselves worse off than before. The higher the rate of money printing and inflation, the worse off people generally are. In short, inflation makes people poorer by stealing their purchasing power.

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Geredigeerd citaat uit Pippa Malmgren (pags. 106-110; vet toegevoegd): Signals.

At the heart of the Eurozone lies a profound social contract problem.

The 2007/8 financial crisis revealed that spending was exceeding income by such a large amount that many European nations and financial institutions were illiquid: they could not meet their cash-flow requirements. In reality, they were more than illiquid. They were insolvent and needed a bailout.
Greece and Cyprus were forced to seek bailouts and to default on their debt. The European Union, with the backing of the International Monetary Fund, supported the Cypriot government when it chose to (or was forced to) take 47.5 per cent of its citizens’ private savings directly from some of their bank accounts to help fund the loss (accounts were eligible for the raid as long as there was more than €100,000 per person in the account). There can be few greater breaches of the social contract than when your government simply takes your money directly out of your bank.

There are those in Brussels and European capitals who believe that, unlike the old social contract which evolved around democracy, the new social contract in Europe may have to be imposed on the people.
According to these elites, the public cannot grasp that this is in their best interest. As things stand, bailing out most of the Eurozone will break the social contract in Germany and failing to do so will break the social contract in the periphery. Reconciling the two may not be possible.

 

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