muses of the moment

June 27, 2012

Interesting exchange

Interesting exchange of ideas in Jim Simclair’s website. Click here and scroll down to Dear Jim.

Groovygirl’s comments:

A currency crisis (like what Jim is describing by using the words “currency-induced cost push inflation”) and inflation are two different things. A currency crisis is caused by a loss of confidence in the currency. It happens quickly, weeks and months, not years.

The reader seems to suggest that the velocity of money and inflation or the velocity of money and the loss of purchasing power of a currency are inversely related. They are not. If that were true, the real inflation rate and value of the dollar, as stated by John Williams of shadowstats.com, would suggest the trend line of that chart should be up, not down, since 2000.

A currency crisis (and the resulting extreme high inflation in prices) is a confidence event, not monetary process.

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