Home > economics, political-economy > Theories of the current crisis: John Williams prediction of hyperinflationary depression
  1. May 27, 2011 at 9:19 pm

    Since you are taking up analyzing hyperinflation theories, and since I’ve been enthusiastically reading your posts recently, I would like to encourage you to take a look at one argument in particular. It’s my hope that you’ll do a post on it but even if I just got some of your comments, I would appreciate it. The reason I think this particular analysis deserves some attention is how much understanding it appears to have and how different is seems to be from the standard fare. It even got concessions from the two authors it critiqued in the process. I warn you it’s long but I do hope you’ll find the time. Like your own posts, I think FOFOA’s writings are often engrossing and never boring.

    • May 29, 2011 at 12:10 am

      I will look at this. I have followed FOFOA previously and found the poster to have interesting insights on a number of issues.

    • May 29, 2011 at 10:18 am

      Here is an interesting quote from FOFOA: “gold is not at its highest and best use being spent (circulated) as a currency during a hunger crisis. Instead, if you are one with PLENTY of net worth, gold is the very best way to shuttle your wealth THROUGH a crisis to the other side. If you are forced to deploy this wealth for food during a crisis, then you apparently planned poorly.”

      This is the flaw in his argument. Precisely because the problem we are facing is the circulation of commodities — i.e., the circulation of capital in the form of commodities — the main argument against gold is that it is stupid to use it as mere means of circulation. Its role as store of value is of the highest importance to muddle through a crisis. For this reason, gold, in every previous depression, was withdrawn from circulation as economic activity contracted. In the Great Depression, the function of gold as store of value came into absolute contradiction with its function as means of circulation of commodities, producing a collapse of credit that could only be overcome by the separation of these functions — gold remained the store of value, while ex nihilo currency became the medium of circulation.

      Somehow, FOFOA believes the present crisis will drive these two functions back together at some point. I could not disagree more. The over-accumulation of capital that forced the two functions apart was, by this separation, liberated to develop to even more extreme limits. There is no going back, I think.

  2. May 29, 2011 at 8:29 pm

    Thanks for taking a look!

    Maybe I misunderstand your comment but FOFOA’s thesis has consistently been the separation of the store of value and medium of exchange roles under “Freegold,” with gold being only the former and fiat currency being the latter (“the medium of savings must be separate from (and float in value against) the transactional currency”). He also talks of the withdrawal of gold from circulation (thus the need for his mantra to “buy physical gold”). It’s my understanding that he believes exactly the opposite of “the present crisis will drive these two functions back together.”

    • May 30, 2011 at 12:14 pm

      You may be right about this. As I stated, I understood him to be saying the opposite. I am going to examine it again. I have enjoyed his insights into the relation between gold and ex nihilo money for some time now. I can only say in this case I must have misinterpreted him, and will give it a second look.

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