Wednesday, April 26, 2017

Quote of the day 26th April 2017


Jim said...

marvellous, and bearing mr churchills quote in mind.

would you like to run me though the fiat currency system we have in place at the moment again please.

Jim said...

also whist you are preparing that, perhaps someone from the labour party would prepare a presentation on why socialism will work this time, when its failed every other time its ever been tried.

this would be an interesting night.

Chris Whiteside said...

Fiat money has been around since it was introduced in 11th century. It is far from obvious that it's performance as a system in the past thousand years in countries not run by idiots is any less satisfactory than the performance of other types of currency in countries not run by idiots.

Both currencies backed by specie (as the pound was when we were on the Gold Standard) and fiat currency will produce disastrous and entirely predictable results when the monetary authorities do something daft such as vastly increase the amount of money in circulation with no appropriate control mechanisms to protect the value of the currency, and that applies whether we are talking about debasing the coinage in a specie-based system, printing vast quantities of notes and coin which bear no relation to the productive capacity of the economy, or failing to have minimally competent bank regulation.

You can cause serious inflation in a specie or other commodity based currency system if incompetent fools are running the economy and there are examples from history of this happening: you can crash a fiat money system and cause hyperinflation if incompetent fools are running the economy. The means of avoiding either are relatively obvious and have usually been well understood.

I do not buy the "anti-expert" argument that economists did not predict the 2008 crash - we may not have known exactly when the day of reckoning would come but there were plenty of warnings both from the IFS and other economists, and indeed from intelligent lay sources, that allowing the banks to invest ridiculous amounts in sub-prime US mortgages while government borrowing was dangerously high would sooner or later lead to trouble.

The most recent example of hyperinflation is Venezuela today and sadly Jeremy Corbyn has not learned from the mistake of praising the incompetent regime responsible.

Agree with you about socialism.

Jim said...

I guess that is what the problem is, its not so much a fiat currency, its just more what the "fiat" is. There lies the problem, its pretty much always idiots.