What's Wrong with Money? E-Book

Michael Ashton

• Herausgeber: John Wiley & Sons
• Kategorie: Wissenschaft und neue Technologien
• Sprache: Englisch

Seitenzahl: 265

Veröffentlichungsjahr: 2016

Beschreibung

The expert guide to understanding and surviving monetary failure What's Wrong with Money? explores how and why money is valued and the warning signs that point to its eventual collapse. Author Michael Ashton is widely regarded as a premier expert on inflation, and in this book, he illustrates how the erosion of trust in central banks is putting us at high risk of both near- and long-term inflation--and a potentially very serious disruption. It's not about a conspiracy surrounding inflation reporting; it's about the tentative agreement we all carry that lends money its value. This value isn't necessarily inherent; while some currency is backed by stored value, others are not. This book walks you through the history of currency and details the ways in which it can fall apart. You'll learn how to invest in any type of collapse scenario, and you'll gain expert insight into the warning signs that signal a coming shock to the financial system. * Track the history of monetary value * Consider how money could die slowly or quickly * Learn investment strategies for both slow and quick scenarios * Examine potential causes of erosion of trust in the monetary system, and the chilling results of such erosion An economic system without money is incredibly inefficient, but our shared agreement in monetary value has historically never been enough. What's Wrong with Money? shows you the lessons from the past and the reality of the present and helps you make plans for the future of money.

Leseprobe

Table of Contents

Title Page

Copyright

Dedication

Preface

Acknowledgments

About the Author

Part I: How Money Lives and Dies

Chapter 1: What Is Money, and Why Do We Need It?

A Pre-Money Society

Money as a Unit of Account

Money as a Store of Value

Money as a Medium of Exchange

The Difference between Wealth, Currency, and Money

Notes

Chapter 2: “Fiat” Money

Issuing Currency

Government as Issuer

Fiat

Chapter 3: The Role of Central Banks and the (Limited) Power of Monetary Policy

What Monetary Policy Can and Cannot Do

Notes

Chapter 4: Bitcoin: A Solution and a Different Problem

Notes

Chapter 5: How Fiat Money Dies

Notes

Part II: Where Are We Now?

Chapter 6: Don't Believe Everything You Read (But Believe Some of It)

Notes

Chapter 7: Central Bankers Are Monetarists No Longer

Two Big Revolutions in Central Banking

Notes

Chapter 8: Central Bankers in the Global Financial Crisis

Central Banking before the Crisis

Central Banking during the Crisis

Central Banking after the Crisis

Note

Chapter 9: Where Are We Now?

Excess Reserves Are Potential Energy—A Lot of It

Plan A: Selling SOMA Securities

Plan B: Let SOMA Securities Mature

Plan C: Conduct Massive and Long-Dated Reverse-Repurchase Operations

Plan D: Just Move Interest Rates to Where We Want Them

What about Velocity?

Notes

Chapter 10: My Prescription

Part III: How to Invest with Inflation in Mind

Note

Chapter 11: Only Three Miracles

Thrift

Compound Interest

Rebalancing

Note

Chapter 12: Inflation-Aware Investing and the Easy Way

The Easy Way

How to Use These Tables

Notes

Chapter 13: Liability-Driven Investing for Individuals

What Is LDI?

How LDI Is Applicable to Individuals

Applying LDI in Your Planning

You Can't Take It with You

Applying the LDI Insight

Notes

Chapter 14: Investing for a Currency Calamity

Is Gold a Disaster Hedge?

Real Property

Human Capital

Note

Index

End User License Agreement

Pages

ix

x

xi

xii

xiii

xv

1

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

124

125

126

127

128

129

130

131

132

133

134

135

136

137

138

139

140

141

142

143

144

145

146

147

148

149

150

151

152

153

154

155

156

157

158

159

160

161

162

163

164

165

166

167

168

169

170

171

172

173

174

175

176

177

178

179

180

181

182

183

184

185

186

187

188

189

190

191

Guide

Table of Contents

Begin Reading

List of Illustrations

Chapter 1: What Is Money, and Why Do We Need It?

Figure 1.1 “Connection web” showing all bilateral connections of 10-product barter economy

Figure 1.2 Web of connections if money is an intermediate step

Chapter 3: The Role of Central Banks and the (Limited) Power of Monetary Policy

Figure 3.1 The price level follows the GDP-adjusted quantity of money.

Figure 3.2 Money and prices are also tightly related in South Africa. And everywhere else.

Figure 3.3 Interest rates are the primary driver of changes in money velocity.

Chapter 4: Bitcoin: A Solution and a Different Problem

Figure 4.1 Total number of bitcoins in circulation

Figure 4.2 Rate of change of bitcoin money supply vs U.S. M2 money supply

Figure 4.3 Cost of one bitcoin, in US$

Chapter 5: How Fiat Money Dies

Figure 5.1 Bolivian inflation 1975–1985, monthly

Figure 5.2 Bolivian inflation 1975–1985, monthly—but in logarithmic scale

Chapter 8: Central Bankers in the Global Financial Crisis

Figure 8.1 Delinquency rate on single-family residential mortgages, booked in domestic offices, all commercial banks

Figure 8.2 Despite a dramatic recession, inflation barely even slowed, in sharp contrast to Keynesian predictions.

Figure 8.3 Total assets of the Federal Reserve, trillions of dollars

Chapter 9: Where Are We Now?

Figure 9.1 Excess reserves of banks completely swamp required reserves.

Figure 9.2 Total assets of European Central Bank, trillions of euros

Figure 9.3 Total assets of the Bank of Japan, trillions of yen

Figure 9.4 M2 money velocity is incredibly low.

Figure 9.5 Integrating the velocity response to interest rates into inflation forecasts

Figure 9.6 Compounded money growth versus compounded inflation, 10-year periods

Figure 9.7 Stocks versus spot commodity prices

Figure 9.8 Commodity prices versus money supply

Figure 9.9 Frequency of year-over-year inflation rates, 1915–2015

Figure 9.10 Frequency of acceleration of at least

X

percent in inflation compared to one year ago, 1915–2015

Chapter 11: Only Three Miracles

Figure 11.1 The ant and the grasshopper

Figure 11.2 The power of interest on interest

Figure 11.3 Compounding interest may be better than compounding uncertain returns.

Figure 11.4 Quarterly rebalancing of crude, copper, coffee, and sugar portfolio

Figure 11.5 Quarterly rebalancing of portfolio of four equity indices

Chapter 13: Liability-Driven Investing for Individuals

Figure 13.1 Range of simulated outcomes for two strategies, 4 percent withdrawal rate

Figure 13.2 The LDI asset mix seeks to match the liabilities' characteristics.

Figure 13.3 Range of simulated outcomes for static and LDI strategies, 3 percent withdrawal rate

List of Tables

Chapter 1: What Is Money, and Why Do We Need It?

Table 1.1 Sample Price List for Trading Post in a Relatively Simple Barter Economy

Table 1.2 A Somewhat-Simpler Price List for a Trading Post in a Money Economy

Table 1.3 Number of Inter-Item Connections with and without Money

Chapter 5: How Fiat Money Dies

Table 5.1 Annual Bolivian Inflation Rates

Chapter 7: Central Bankers Are Monetarists No Longer

Table 7.1 Japanese Money Growth and Inflation, 1980–2015

Chapter 9: Where Are We Now?

Table 9.1 Inflation Outcomes Implied by Certain

M

and

V

Growth Rates

Chapter 12: Inflation-Aware Investing and the Easy Way

Table 12.1 Inflation-Adjusted Portfolio Success Rates, Monte Carlo Simulation

Table 12.2 Portfolio Success Rates: Monte Carlo Simulation (4% withdrawal rate)

Table 12.3 Portfolio Success Rates: Monte Carlo Simulation (5% withdrawal rate)

Table 12.4 Inflation-Adjusted Accumulation Success Rates: Monte Carlo Simulation

Chapter 13: Liability-Driven Investing for Individuals

Table 13.1 Years to 10% Portfolio Failure Rate: Monte Carlo Simulation

What’s Wrong with Money?

The Biggest Bubble of All

MICHAEL ASHTON

Copyright © 2016 by Michael Ashton. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone] or fax [phone].

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

ISBN 9781119191018 (Hardcover)

ISBN 9781119191179 (ePDF)

ISBN 9781119191162 (ePub)

Cover Images: Soap bubble © rusm/iStockphoto;

US one hundred dollar bill © burakpekakcan/iStockphoto;

Pushpin © rimglow/iStockphoto

Cover Design: Wiley

This book is dedicated to my wife, Diane,and to our joint investments in the future:Andy and Lila.

Preface

Every person in authority, whether at the Federal Reserve (Fed) or the European Central Bank (ECB), in the White House or at 10 Downing Street, on Capitol Hill or in Parliament, says that we should not worry. Sure, there are holdouts—people who worry, like we do—but they are marginalized as cranks or backbenchers.