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Hyperinflation Versus Deflationary Collapse

by Darryl Robert Schoon, Gold Seek:

In the world of phenomena, everything has a beginning and an end; and today, the bankers’ endgame is moving closer to its inevitable resolution and demise. The question is no longer if, it is when and how.

The relationship between paper money and gold is causal in central banking’s collapse. When paper money was backed by gold, it (1) gave the bankers’ paper money its value and (2) constrained the ability of governments to print limitless amounts of money, as governments needed money backed by gold to balance trade deficits, i.e. value for value.

The importance of this constraint, i.e. “golden-fetters”, became clear when escalating military spending caused the rapid loss of US gold reserves; and in 1971, the US withdrew the gold-backing of the US dollar and the US balance of trade permanently went negative.

 

With gold no longer limiting how much money governments could print, after 1971 the global money supply exploded.

 

http://positivemoney.org/how-money-works/how-did-we-end-up-here/

In capitalist economies, because money enters the money supply as loans, the explosive rise in the money supply led to an equally explosive rise in debt.

 

Today, this is the central bankers’ final—and fatal—conundrum: Aggregate levels of debt are now so high, credit can no longer induce sufficient economy expansion to pay off or even service capitalism’s constantly compounding debts.

Central bankers’ efforts to revive economic growth, e.g. quantitative easing, low, zero and negative interest rates, are like pouring more and more gasoline into an already flooded engine hoping the additional gas will cause the stalled engine to go faster.

Today, central bankers are trapped by conditions they created. It was their excessive expansion of the money supply after 1971 that lead to the speculative bubbles whose serial collapse resulted in the reawakening of deflationary forces not seen since the Great Depression.

To prevent another Great Depression, central bankers desperately tried to revive economic demand and growth by increasing the monetary base to increase the amounts of loans banks could make.

 

But instead of loaning the money, banks redeposited the excess reserves (AMBSL) with central banks; and the hoped-for increase in circulating money (M1, M2, M3, etc.) and credit and debt (TCMDO)—and growth in economic activity—never occurred.

Read More @ GoldSeek.com

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