Reflections on Finishing the Money Supply Data.

In Money Supply on May 11, 2011 by CQCA

The scary (but expected) aspect of the world’s money supply over the last five years is that no country has actually deflated its currency. Every single fiat currency in the world was expanded between 2005 and 2010.

What scares me more is that the majority of this inflation took place in the developing world. By contrast, developed economies like the U.S., the E.U. and Japan, were all on the lower end of the inflation spectrum, even though they could have been better. Economic development, as well as personal wealth creation, comes from increased savings. The central banks of the poorest countries in the world have created currencies that destroy the value of savings.

Similarly, the BRIC countries have all inflated their currencies by more than 100% each. Their astounding growth over the last five years is likely to have been the result of an inflationary bubble. All inflationary booms eventually turn into economic busts. Imagine what will happen when the currencies used by 2.8 billion people all go bust.

I do not trade in foreign currency. Talk about throwing bad money after bad. But, if someone gave me a $1 million and told me I could only invest it in forex markets, I would short the Hong Kong Dollar and have delivery made in Bahamian Dollars.

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