Brian Micklethwait speaks to Detlev Schlichter on his upcoming book, Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown.
As a derivatives trader for 19 years, Detlev Schlichter resigned his position as a senior bond portfolio manager in 2009 to work full-time on this book, about fiat monetary systems and financial crises. He therefore knows of what he speaks. In this extensive and detailed interview, he explores with Brian Micklethwait what we should do to get our current financial problems behind us; this one really is worth listening to in its 35-minute entirety.
“Paper money systems are unstable and so is our system. It will end. It will most likely end badly. It will most likely end soon.”
Speaking from a heavily-influenced Austrian position, Herr Schlichter examines what would happen if we did the ‘right’ thing by turning off the Keynesian money printing spigot — and exposing all of those malinvestments — and what might happen if we keep going into the Götterdämmerung of the fiat money system with the ‘wrong’ thing, by allowing the spigot to pump even faster.
“Paper money systems have always collapsed in history. None of them have survived. And our system is really not that old. It only became a complete one hundred per cent paper money system in 1971, when the dollar became an irredeemable piece of paper. Central banks could still convert it into gold until 1971.”
Amongst many other sub-plots, debating the relative influences of Hayek, Mises, and Rothbard, there’s also a fascinating sub-discussion about the role of paper money in the collapse of the medieval Chinese empire, which allowed the later domination of China by the western powers of Europe, such as Portugal and Britain.
For those interested in the work of Herr Schlichter, and up-to-date comments upon an unfolding global financial situation, you can find his personal web page, here.
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Great interview Brian! “Do ideas matter?” Yes, but getting the ideas propagated matters at least as much. The LA (Chris Tame’s) view seemed to be “don’t bother converting the masses, convert the idea-shapers, journalists, politicians etc and the rest will follow”. However, these very people have too much involved and at stake in the status quo IMO The closest ‘we’ got was maybe Keith Joseph and Nick Ridley.
With the current crisis it is clear that large swathes of the ‘informed’ public know that printing money is no good, whereas Robert Peston and others are spinning it for all it’s worth. It’s clear that politicians- for the most part- and economic journalists simply do not understand the Austrian School even if they have heard of it. It’s the ‘yoof’ one has to appeal to now before their minds are too poisoned by Public Sectorism. An alternative ‘A level’ primer in Economics from the Austrian perspective would be a good start.
Having read an advanced draft of Detlev’s book what I like is the fact that while deeply researched and academic, it is very accessible. But- like your interviews -also enjoyable, which is a key factor I believe. You always ask the questions that I want answering Brian, like ‘the thought experiment’ view eg “if you had a microphone broadcasting to the world, what would you say? Is there anything you could say to cushion the blow“. “Do ideas matter?“
The demise of fiat money is inevitable, but predicting when it will occur is dicey–even allowing oneself a three-year-wide window. Statists with a vested interest in fiat money and an OPM habit (OPM–sounds like opium, is equally addicting, stands for other people’s money) are capable of doing anything to prolong their ride on the gravy train. They could, for example, involve the nation in a major war (viz., one that is bigger than the three current “minor” wars combined), which would compel even more deficit spending financed mainly by fiat inflation as a “vital necessity” and a “patriotic duty.”
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