The Present Fiat Monetary System Is Breaking Down

Notwithstanding the popular view that increases in the money supply can help grow the economy, money cannot do such things. More money cannot replace real savings that sustain individuals in the various stages of production. According to  Rothbard, this is revealed once the pool of real savings starts to decline and the central bank’s monetary pumping becomes ineffective in reviving the pace of economic activity.In the framework of market-selected money such as gold and in the absence of a central bank, an increase in assets’ purchasing power is going to reflect an increase in the pool of real savings and thus economic growth.Central bank policies, however, curtail investors’ ability to distinguish wealth-generating activities from non-wealth-generating ones; i.e., bubble activities. An increase in money supply masquerades as an increase in real wealth. This results in erroneous investment decisions. Hence, all other things being equal, the exchange value of assets is set by the pool of real savings. Changes in monetary liquidity because of central bank policies cause disruptions known as bull-bear markets.

Source: The Present Fiat Monetary System Is Breaking Down | ZeroHedge