Wednesday, August 25, 2010
Here's a neat little concept that FOA introduced briefly in 1999. I think it explains a lot about the inflation,deflation, hyperinflation debate when it finally sinks in that this is where all the money went for the past 30years: into inflating the credibility of the $IMFS far beyond the underlying reality. And yes, it has a directimpact on the Freegold revaluation as well. So here I will try to expound on this enlightening concept just abit.
Part of the reason the rest of the world did not abandon the dollar in 1971 was that the rate of economicexpansion flowing from Middle Eastern oil cheaply priced in U.S. dollars was already exceeding theexpansion rate of the money supply. So the switch from a semi-gold-(con)strained monetary system to amuch more expandable "balance sheet money system" as I like to call it — or another name I like is "purelysymbolic monetary system" — allowed for the non-deflationary addition of many new "quality of life"gadgets, widgets and shipping lanes that the world had never before imagined.For the next three or four decades we would be able to comfortably afford the new introduction of BetamaxVCR's, microwave ovens in every home, personal computers, DynaTAC cell phones, camcorders, digitalcameras, LaserDiscs, Compact Discs, DVD's, MP3's, and on and on. Eventually, all of these wonderfulproducts would be built cheaper by someone else on the other side of the world and shipped to us cheaplyusing the oil purchased from the Middle East with easily available U.S. dollars.