Moneyweek: Japan leads the way… through a minefield

Over at Moneyweek, Bill Bonner argues in a subscriber-only article that ersatz money is a flop.

Bonner describes John Law‘s disastrous paper money scheme and the origins of ‘our current experiment with paper’. He identifies the features of the long credit boom, which has come to an end, with reserves of dollars worlwide, over consumption and over production. Bonner argues that Japan blew up first and that the planet-wide bubble burst in 2007. He says we are now all following Law’s example.

Bonner quotes — as emphasised below — Mises in Human Action:

The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

I recommend the article, which can be read by taking a free trial.