Wednesday, October 08, 2008

Feel free to copy, there is no copyright on an Anoneumouse montage. (click on image to enlarge)

'imaginary money'

A touch of Weimar, a whole new angle on Mark(s) to Market

"The Bank of England has been putting substantial sums into the market today and it is ready to do more when that is needed"

We are now on the road to hyperinflation

If we can learn anything from history, it is that a government cannot be trusted to manage money. When currency is not redeemable in gold, its value depends entirely on the judgment of politicians and unfortunately, that is now the situation we find ourselves in today.

Money is not wealth. It is only a measurement of wealth. A given amount of money, qualified by the value of money as expressed in its purchasing power, represents an account of wealth at a given point in time in an operating market. Given a fixed amount of wealth, the value of money is inversely proportional to the amount of money the asset commands: the higher the asset price in money terms, the less valuable the money. When debt pushes asset prices up, it in effect pushes the value of money down in terms of purchasing power. In an inflationary environment, when prices are kept high by excess liquidity, money wealth stored in the underlying asset actually shrinks. This is the reason why hyperinflation destroys paper money wealth.


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