Interesting read on French inflation

[silversky]

Just read this really excellent old paper by Andrew White.  It was written more than a hundred years ago specifically about the French hyper inflation in the 1790's around the time of the revolution.  It's only about 70 pages long and is quite an easy read inside a day.  All the way through it I've been repeatedly struck by the parallels to our modern QE and financial tampering.  Some of the thoughts expressed by the financial experts of their time are almost identical to our very own experts now nearly 200 years later.  Quite spooky.

It has firmed up my view that it's better to put a little aside every month in real money rather than keep it in fiat funny money.  I wish I'd come to this knowledge 20 years ago.  I'm certain that our modern batch of experts are genuine in their beliefs and really do have our best interests at heart, but just like their predecessors, they don't actually have the power to go against nature and it will inevitably end up going badly wrong.  Anyway, well worth a read.

https://mises.org/library/fiat-money-inflation-france

[sovereignsteve]

I think you are extremely charitable to our so-called experts. Most of the ones in real power know exactly what they are doing.

The first study subject for economists should be history. They can't think up anything that hasn't been tried before and failed.

[vand]

Destroying the value of your currency has never worked throughout history. Real (economic) wealth is goods and services, not units of exchange. When you continually create more claims on wealth than can actually be met, you create a system that cannot be reversed and must ultimately end in default.

[silversky]

22 minutes ago, vand said:

Destroying the value of your currency has never worked throughout history. Real (economic) wealth is goods and services, not units of exchange. When you continually create more claims on wealth than can actually be met, you create a system that cannot be reversed and must ultimately end in default.

I couldn't agree with you more.  The paper above is a horror story in just that.  200 years old but certainly looks to be repeating through stupidity or malfeasance and this time on a global scale.

[ApisMellifera]

Yes. I’ve been learning/reading a lot about history recently to understand why/how these bubble are created. The French inflation and many others is documented in a book called: Extraordinary Popular Delusions and the Madness of Crowds. Think you will like this read.

https://www.amazon.co.uk/gp/product/1566191696/ref=oh_aui_detailpage_o05_s00?ie=UTF8&psc=1

The most ridiculous bubble I find was the Tulip Mania in 1637!

https://en.wikipedia.org/wiki/Tulip_mania

What I also found interesting is that the people who are aware of the ‘hyperinflation’ moved there currencies into PM well or just before the bubble popped. Yes some folk left France and some got caught. Will PM ever be banned or outlawed ? Possibly… but I don't think so but yeah anything can happen. 

I also agree that services and goods offer the solution to the irresponsible debt creation/hyperinflation but I think that realistic financial education and understanding is an important key to ride these storms.

The most recent currency crash was the 1993-2015 Zimbabwe Currency Crash https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe and Venezuela is close to a hyperinflation https://www.thenation.com/article/why-is-venezuela-in-crisis/ 

Have you seen this video Ray Dalio? I think you might like it if you haven't seen it yet. He summarised the 'machine' very well especially human behaviours. I think there are solutions in there for these boom and bust cycles.

 

 

[Paul]

At least with Tulip Mania - you had an actual tangible 'thing'

Whilst i understand the concept of BitCoin -  Just what is bitcoin ?  

you have a share of errrr....... some bit of invisible block chain that is out there in the ether in internet land somewhere, that is 'mined' not in a traditional meaning of mining in digging something out of the ground.  but mined by computers and by not getting your hands dirty 

  

[silversky]

Thanks for the links, will have a look through them.  Always interesting to read about other countries history.  I think the vid at the bottom starts off well and is a good visualisation of some of the processes in an economy but I disagree very strongly with it's conclusions.  It's actually a very good demonstration of the current delusion in the minds of our powers that be and I appreciate you posting it.  It shows exactly how believable printing is as a solution and why I believe that many of our policy makers today still genuinely believe that they have our best interests at heart and that they can succeed with this model in the end if they just do a little bit more tampering.

The "beautiful deleveraging" theory that the author describes is the road to ruin we have been running down for the last 45 years.  He talks about carefully printing just the right amount more paper to get the balance right.  It's so reminiscent of the very clever and very genuine economists attempts 200 years ago in France that in the end failed so spectacularly.  A constantly expanding money(currency) supply to balance an ever increasing debt burden ends up as theft plain and simple even if they could achieve their perfect balance.  The people in his model act like computer components with very certain outcomes.  Input in equals predictable output.  But in fact as the paper on the French experience shows, the more tampering that goes on from above ie printing or complex rules to force people to accept loans etc. the more the people react against it in ways you didn't expect.  Much like in Japan right now with negative rates causing even more saving rather than the spending it was hoped it would cause and in Europe with large banks building vaults to hoard cash rather than pay negative rates to keep it on deposit with the central bank.  We are definitely down the rabbit hole and well into Alice in wonderland stuff now.  The weirdness is accelerating and doesn't bode well imo.

Interestingly, going back to the French experience, when Bonaparte rose to power he was asked how he was going to pay for things?  It was suggested to him that he should print some new fiat and apparently he said something like over his dead body or words to that effect and that he would only pay in cash or not at all.  Millions of lives lost and the destruction of a nation caused by well intentioned economists trying to boost a stagnant economy with ideas much like this elegant "beautiful deleveraging" theory.  Sobering the similarities.