Do we face the collapse of the dollar and the global financial system? If so, why and how will it collapse? Is there hope for the future, or do we face a dark age? If there is hope, what specifically offers a way ahead if the dollar, the euro, sterling and the yen are no more? Can mackerel be used as money? If it can, is silver better?
Rafi Farber (YouTube|Twitter|Patreon) joins David Scott to tackle these and many other questions in a discussion of the endgame for fiat currency, the end of the dollar and the prospect of a global crack-up boom: a hyper-inflationary collapse.
Despite the ominous subject matter, Farber remains an optimist as he looks to gold and silver—real commodity money—to be the solution to maintaining economic essentials such as the division of labour, in a crisis brought about by a failure of the major currencies of the world.
The interview analyses the plummeting value of the dollar, the euro, the pound and the yen. All are sinking as the underlying value falls of the debt instruments on which their value rests. Critically, Farber highlights that, for the first time, the difference is being made up not by more debt but by completely unbacked paper—worthless IOUs.
David and Rafi discuss why the dollar is a Ponzi scheme, consider why central bankers are fooled by econometric voodoo, and explore the corrupting effects of the power placed in the hands of central bankers. Additionally, the discussion explains Ludwig von Mises' regression principle—that the value of money can be traced back ("regressed") to its value as a commodity—and spells out why money emerges naturally from people trading, as it is the most liquid (that is to say, most generally desired) good.
The conversation extends to cover the dangers posed by a society based on theft, and the evil outcomes and barbarous policies that often follow. Specifically, Farber highlights that the decay of societies is associated with theft via debasement of the money supply in Biblical times as well as in modern. He throws light upon the Biblical denunciation "Your silver has become dross", pointing out that this is not only a metaphor for moral decay, but also an economic observation.
Farber concludes by explaining that theft is a zero-sum game, as is any system built on theft; but that with honest money, both parties to a transaction benefit. In short, honest trade is better than exploitation. When money (or money substitutes) are political, then politics becomes more important and more divisive than in sounder times. Honest money and honest exchange allow people to help one another. The political system, in contrast, is a fight for control of Leviathan so that the winning group can exploit the losing group. This viewpoint is what makes Farber an optimist, as he looks towards the end of a system that is old, corrupt, harmful and ready to fall.