My Actifit Report Card: 九月 9 2018

Today, the cycle of asset inflation, morphing into price inflation has so far always led to a credit crisis, but each of these crises can be regarded as a minor version of Law’s French experiment. They start with the expansion of unbacked paper currency, leading to asset price inflation, which feeds into price inflation, then a credit crisis. These cycles have so far not developed into bubbles as destructive as that of John Law’s, but the distortions have been allowed to accumulate successively over each credit cycle. Consequently, the collapse following the inflationary puff seen in France during 1720 has not yet been seen today.

That time appears to be approaching with the post-war inflationary bubble becoming increasingly difficult to sustain through successive credit crises. Both the expansions of base money and of bank credit in the last credit cycle were unprecedented, and the situation has become more unstable since. The message from Law’s experience is the collapse of the entire fiat money system is unavoidable and probably close. And when it happens it will destroy exposed paper currencies more rapidly perhaps than anyone expects.

Walking