December 22, 2015
As 2015 draws to a close, I wanted to thank all the readers who have supported The Money Enigma in its first year and highlight some of the articles that readers found most interesting in 2015.
#10: The Value of Money: Is Economics Missing a Variable?
Just slipping into the Top 10 list is an article regarding the “value of money”. If money has value and if the value of money is an important factor in the determination of prices in money terms, then why doesn’t economics officially recognize the value of money as a variable in its equations?
#9: Monetary Base Expansion: The Seven Stages of Addiction
Is printing money our great modern addiction? In this article it is argued that there are striking parallels between the methamphetamine addiction cycle and the economic/market cycle that occurs following a dramatic expansion of the monetary base.
#8: What Determines the Price of Gold?
Does 2015 represent the low point for the gold price? While there are many theories regarding the price of gold, the view of The Money Enigma is that there is one key driver of major bull and bear markets in gold: long-term economic confidence. Bull markets in gold tend to begin when people are too optimistic about the long-term economic future of society.
While the near-term costs of reducing the monetary base may seem to outweigh the benefits, there is a terrible risk associated with the path of inaction.
#6: What Factors Influence the Value of Fiat Money?
What determines the value of money? Why does the value of money fluctuate and tend to fall over long periods of time? And why does the value of a fiat currency sometimes fall precipitously? The view of The Money Enigma is that fiat money represents a proportional claim on the future output of society. Over long periods of time, an increase in the monetary base relative to real output will reduce the value of the proportional claim and lead to rising prices across the economy. Over short periods of time, it’s all about changes in expectations…
#5: Does “Too Much Money” Cause Inflation?
Does printing money cause inflation? And if it does, why didn’t QE trigger inflation? This popular article tackles these complex issues and argues that it is not “too much money” per se that causes inflation, but the expectation of “too much money” relative to future output that matters.
#4: Why Does Money Exist? Why Does Money Have Value?
One reader commented that this post “should be studied line by line”. Frankly, I couldn’t agree more.
#3: Government Debt and Inflation
Government debt has a critical role to play in the determination of the price level. More specifically, the market’s assessment of the sustainability of government debt and deficits has a direct impact on the value of the fiat money issued by that society and, consequently, the rate of inflation.
#2: The Risk of Hyperinflation in the United States
This very popular article asks a simple question: “Is there a risk of hyperinflation in the United States?” Ultimately, fiat money is only as good as the society that issues it…
#1: A New Economic Theory of Price Determination
The most popular article of 2015 challenges the fundamentals upon which modern economics is built. The most important article of the year and a must read for those that care about the science of economics…