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|User Info||Sound money; entered at 2011-05-22 22:40:06|
Incidentally, it is a ridiculous lack of understanding of exactly how "money" and "credit" actually work that leads to the (false) belief that one can escape perdition with "hard money."|
I've written on this many times in The Ticker and spent an hour-long Blogtalk on it as well; the fundamental reality is that as soon as lending of capital occurs you have an inevitable need for recession. And as soon as unbacked lending occurs you create a naked short on the currency involved.
Since a naked short is identical in effect to counterfeiting it puts in motion the dynamic you're speaking of. It is NOT the existence of fiat currency that causes this problem. Rather, it is the attempt to void the fundamental mathematical relationships between exponential (compound) functions, which is doomed to fail simply because the mathematics make what's being attempted, over long periods of time, impossible.