commodity money

The subprime crisis represents massive unpunished malfeasance by financial intermediaries managing US dollars. This discourages people from using US dollars as money.

In 2008 January, the fed drove real dollar interest rates negative – only slightly negative, but negative interest rates suggest an intent to inflate away the dollar denominated liabilities of financial intermediaries until the real assets cover the dollar denominated liabilities. In the ensuing two months, all commodities that are readily storable and have large liquid markets, all commodities that can usefully function as a store of value, went up around twenty percent: aluminum, barley, cocoa, coffee, copper, corn, cotton, gold, lead, oats, oil, silver, tin, wheat, zinc.

This suggests that when fiat money collapses, a process likely to take place in fits and starts over a very long time rather than all at once, we will move towards a balanced basket of commodities, rather than return to the gold standard.

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2 Responses to “commodity money”

  1. Very energetic article, I enjoyed that bit. Will there be a part 2?

  2. […] Basics of Online Share TradingThe Liquidity Of The Foreign Exchange Market Is Phenomenalcommodity money […]

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