How inflation betrays the economy is hopefully one of the insights you take away from this post. For this economic term should not only describe price inflation, but also monetary inflation.

  • Price inflation is the growth or increase of prices in the REAL economy.
  • Monetary inflation is the growth or increase of a currency that is in circulation, also called the money supply.

The money supply is the sum of monetary aggregates or “types of money”. In nickel words, the sum of Cash and Credit:

  • Cash is interest-free and is issued by the State as notes and coin, also called “narrow money” or M0
  • Credit is issued at interest by banks, central banks and other financial institutions, also called “broad money” or M1 to M4 or more
  • Interest is not issued by anybody. So Peter has to borrow from Paul to pay interest. Or is made bankrupt.

Have you noticed the increase of personal and company bankruptcies?

Bankruptcies in the US 1980 - 2008

Canadian Bankruptcies 1980 - 2008

Bankruptcies since 1960

Compulsory and voluntary bankruptcies since 1960

Source of the UK data: The Insolvency Service.

And now Natioin States are planned to be bankrupted! But the supply of credit money “grows”.The big number games continue.

The largest amounts are sovereign or public debts. They therefore require the largest amounts of interest. These are part of every government’s budget, i.e. are raised from unsuspecting taxpayers and voters.

NEXT: Metrics

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