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A review of Detlev Schlichter’s Paper Money Collapse on Amazon.com

I have just posted the following review on Amazon.com of Paper Money Collapse. I only learned last night that the review embargo date had now arrived and that the time to be talking this book up is now, so this review was somewhat hastily written, although it is the result of quite a lot of thought. This was my very first review of any book on Amazon, and it shows, I’m afraid, particularly in my blundering attempts to italicise, which work here by those methods, but not there. Also, although I said I liked it, I didn’t tick the box saying that I liked it. Can I do anything about any of that? Probably not. (LATER: actually, I now learn that you can edit these reviews. The italics thing now makes no sense!) Oh well, blog and learn, review on Amazon and learn. I will be amazed if I don’t find myself wanting to say lots more about this book, but what follows is my first best shot.

An effort but definitely worth the effort – could be huge

I agree with the bit on the cover of this book where it says that this is not an easy read. For me, it has not been, and not just because the truths Schlichter spells out and explains are so not-easy to take. I am a huge fan of his, and have been ever since I first heard him talk about the analysis in this book in London about a year ago, but he makes me work hard. This book is heavy on logical exposition, much lighter on diverting anecdote. For the latter sort of Schlichter stuff, you must read his blog.  

One way to describe Paper Money Collapse might be to say that it is the sort of book that the great Austrian School economist and economic historian Murray Rothbard might have written, had he lived a bit longer. Last year I read Rothbard’s Man, Economy and State. While doing this, I kept hoping that I would read a theoretical analysis of our current financial woes, as opposed merely to Rothbard’s general take on Austrian Economics as a whole. I realise that this was a lot to ask of a book published several decades ago, and not surprisingly I was, although in general much educated, largely disappointed on that particular count. Well, what I was only hoping to read in that Rothbard book was what I did read in Detlev Schlichter’s much shorter book, which I heartily recommend to anyone willing to really get stuck into it. Here is a conceptual analysis, in very much the painstaking Rothbard manner, of how non-commodity-backed currencies behave when they collapse, and why they do collapse, always, inevitably. In other words it is about the times we now live in.  

I learned a lot from reading Paper Money Collapse. In particular, Schlichter has convinced me of the wrongness of the argument that since we want economic activity in the world to increase indefinitely, but gold is, barring a few trivial further discoveries, fixed in quantity, gold won’t work as the basis of currency. But non-elasticity is exactly why gold is such a good basis for currency. Totally elastic money, on the other hand, inevitably collapses, always and everywhere. Why should our elastic money be any different?  

Schlichter is not pointing the finger at individuals. This is not a detective story, where in the final chapter all the suspects are rounded up and Herr Schlichter points the finger at the guilty man. President Nixon’s decision to break the final link between the dollar and gold is deplored, and Ben Bernanke’s recent pronouncements are likewise disapproved of, but many of the decisions that lead to our current mess were made many, many decades ago, and by their nature they are the kind of decisions which are far easier to make than they are to reverse and clean up after.  

Nor does Schlichter believe that hyper-inflation now threatens us all because central bankers are unaware of the badness of hyper-inflation. They know that hyper-inflation is bad. Unfortunately, they also know that if the collapse that Schlichter describes occurs while they are in office, then that, for them, will be even worse than a bit more inflation or even quite a lot more inflation. So, they carry on printing money and postponing the resolution of the problem, which means that when nemesis does finally arrive, it will be all the worse. But, says Schlichter, they know what they are doing; they just don’t know how to stop. Schlichter telling them to stop will accomplish nothing.  

I suspect that Schlichter may be being rather kind about just how plain stupid some even quite high ranking central bankers now are, but clever or stupid, these people are now thoroughly boxed in by their previous decisions and by the decisions of their predecessors of earlier years and decades.  

I have been using the phrase “paper money”, as Schlichter himself does in his title. But as we all know, when central bankers now create yet more money, they are mostly putting numbers in electronically managed bank accounts. It is not the printing of bank notes that is the problem; it is the lack of a commodity base to control the process. By the same token, paper bank notes that refer to a currency that is solidly based on something like gold would be fine. But I am sure that Schlichter has thought long and hard about this phrase, and I gladly defer to his decision to call it “paper currency” in his title. I certainly don’t know a better way of putting it. “Fiat” money? “Elastic” money? (That’s the phrase that Schlichter switches to in the subtitle, also prominently displayed on the front cover.) Both are a bit more accurate than “paper” money, but are also a bit less attention-grabbing for the kind of intelligent and educated everyman whom Schlichter is trying to reach. “Paper” gets over the gist of the problem pretty well, I think. And you start learning what that means as soon as you read the sub-title.  

When it comes to Schlichter’s pessimism about him personally having any influence on the conduct of public policy, I agree with him, in the short run. But I think he may be proved wrong, in the longer run. I agree with him that there is nothing much he can say to the people now in charge of financial policy that will persuade them to do the right thing now, which basically means getting the collapse over and done with as soon as possible. But when this collapse starts seriously happening anyway, in just the manner and for precisely the reasons that Schlichter says, he could then become a very Big Cheese, as we say in my native England. In fact, if this book does half as well as I suspect it may, Schlichter will probably be accused, by various paper (fiat, elastic) money idiots who know only the title of this book but nothing of what it says, of having precipitated the catastrophe he describes. But other people, including politicians and central bankers, could also then be asking him: So, Schlichter, what the hell do we do now? I urge Schlichter to be ready for this moment. Suggested title for his next book: Now What? (Presumed answer: Let non-state controlled and non-state backed bankers supply currency, which they will back with gold. Get out of their way and let them get on with it.)  

Meanwhile, I urge anyone who thinks that he might find this book enlightening, and helpful for personally navigating through the mess, to go ahead and be enlightened. I think this book may become very big. It certainly deserves to.

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22 comments to A review of Detlev Schlichter’s Paper Money Collapse on Amazon.com

  • Nice review. The book is available on the Kindle here. That’s an Amazon UK link. Your review doesn’t appear on Amazon UK for some reason. Perhaps it’s worth copying and pasting.

  • I second Rob’s suggestion that you post it on Amazon.co.uk as well. Left to themselves, Amazon may or may not get round to it.

    I may even (and this is a rare thing)… buy the book on the strength of a favourable review on Amazon.

    Let’s hope someone now posts a bitterly hostile review, as nothing helps sales like controversy.

  • Laird

    It’s interesting that the book is finally available on Kindle. The last time I checked (roughly a week ago) it wasn’t (at least, not in the US).

    What’s also interesting is the pricing. Has anyone else noticed that Amazon has been rather significantly raising its Kindle pricing? They originally claimed that almost all books were going to be $9.99 (in the US), but I haven’t seen any at that price in a long time. Paper Money Collapse is priced at $17.99, with the hardcover edition only $22.13. With a price differential of only about $4, I think it makes more sense to buy the physical copy.

    And the UK pricing is substantially higher than the US. There the Kindle edition is £19.50, and the hardcover edition £22.94 (again, note the very small price differential). With the pound/dollar exchange rate currently about $1.60, that means that in the UK the hardcover version is about 40% more, and the Kindle version almost 75% more, than in the US. Why is this?

  • Laird

    Sorry, in the previous post I meant to include a link to the US Amazon.com site for Paper Money Collapse. Here it is.

  • Johnathan Pearce

    I bought the dead-tree version. I am racing to get through a stack of work-related stuff and then read it and review it for Amazon both on the dot.com and dot.uk versions.

  • Paul Marks

    This sounds like a very good book. Certainly the review is very well written – and true.

    Of course a financial/monetary collapse is comming – the powers that be, may try hyper inflation to put it off a bit longer (actually I think that might bring it on quicker) or they may not. But this financial system has gone past the “it does not make sense” stage.

    It NEVER made sense (as so many people pointed out) – it was not the “motor of the economy” (as was so often said by the establishment). No the financial/monetary system was like some demented vampire bat draining the life blood of what was left of the economy so it could then (briefly) wildly fly round the room – before collapsing back on the neck of the economy again.

    But now the bat has actually poisoned itself (perhaps some combination of spittle that it was using to keep its victim in a state of happy stuper went wrong). Actually at some point the bat (and the victim?) were bound to get killed by all this …. activity.

    What will the death throes actually look like – in detail.

    I do not know yet – a good reason to buy this book (as they may look as the author describes).

    And WHEN will it happen?

    We have always known it would happen – but we have never known WHEN.

    I still do not know.

    But I am willing to say that I think a certain person’s desperate antics to keep the collapse from happening before November 2012 are going to fail.

    What happens then?

    Afterwards?

    Nothing is fixed in stone.

    It may be the new Dark Age.

    Or people may help themselves and others – and build such things as honest money and sound finance.

    It is up to human beings.

  • Good review – anticipating the anticipations of others.

    Mine will be the hardback.

    For the next book, I’d like to see a chapter on bitcoin, or rather, digitally distributed currency more generally and the possibilities it raises (e.g. trade between DD currencies and traditional commodity currencies). There is surely more to the security problem than just a few small time toe-rags pirating the mining process.

  • Matt

    @Paul Marks – Why would we expect the reaction to this to be anything other than more totalitarianism? It feels naive to me to expect a real currency and new liberties to emerge, however strong one’s faith in human nature. Rather won’t we see governments scapegoating bankers, possibly to the extent where working for a bank could become rather dangerous… followed by a collapse into a Soviet lifestyle as the government moves to “protect” us from bankers and hyperinflation by assuring delivery of, and rationing basic supplies – food and energy?

    I try to be positive, but the natural instinct of politicians as this bites is going to be to take more control, not less.

  • stef

    @Laird Kindle base pricing is set by the publisher not Amazon.

  • Current

    Schlichter over-eggs the collapse argument.

    Fiat money is troublesome, but I see know evidence that an inflationary collapse is imminent in the US or Europe any time soon.

  • Laird

    Current, I presume that you haven’t been reading any of the articles on his website, let along the book, right?

    Stef, I don’t believe that’s correct. Manufacturers aren’t permitted to set retail prices; that’s a violation of (US) antitrust law. At most they can suggest a retail price, which the retailer is free to ignore. And even if the publishers are all pushing for higher ebook prices (which I rather doubt, but I have no evidence one way or the other), Amazon should be resisting by pointing out that such pricing is contrary to their interests in selling more books (their marginal cost of selling an e-book being, of course, zero). My personal belief is that Amazon is simply gouging, and this has had a direct impact on my purchasing.

  • Stef is correct, Laird. I’m surprised Amazon hasn’t put its usual disclaimer about the price being set by the publisher there, and I’m not sure a publisher counts as a “manufacturer,” so anti-trust probably doesn’t apply. Any time the price is higher than $9.99, Amazon points at the publisher so we know it’s not them doing the gouging.

  • I just ordered it for my Kindle and the price has increased to $19.92. I should have jumped on it yesterday………..

  • Laird

    Brother J, please show me where the “usual disclaimer” is on Amazon. Not saying it isn’t there, but I’ve never noticed it and I’d like to see what it says.

    And while I’m no anti-trust expert (took a course on it in law school, but that was a long time ago and I’ve never practiced in that field), I have a hard time believing that publishers aren’t treated the same as any other manufacturer in this regard. Certainly there’s no principled distinction that I can think of (not that “principles” necessarily matter much to the government!). But if you have some support for that assertion I’d like to see it.

  • Here you go, Laird. It’s right near the top of the page in this example. It’s not the only time I’ve seen this. Like I said, I’m surprised they aren’t deflecting blame for the high price here as well.

  • PS: Laird, IANAL, as I’m sure I’m about to make abundantly clear, but a publisher is really more of a distributor than a manufacturer in my view of the world. The author is the “manufacturer” here. I can see ( I think) how the publisher can just tell Amazon “this is what I’ll accept as compensation from you, you add your usual markup. End of Discussion.” So, you’re right in the sense that if Amazon decides it won’t accept less than its usual markup it could be thought of as gouging, but it has less control over the wholesale price than you think and even if they did accept less, the price sould still exceed $9.99. Amazon is free to offer or not offer the book on those terms.

    Just my $0.02 (or tuppence, if you prefer) worth. Don’t take it as Gospel.

  • Laird

    Brother J, I can’t get that link to work. Could you please re-post it?

    And just to be clear, I never said that a publisher couldn’t charge Amazon whatever it wanted to for a book (physical or electronic); of course it can. What it can’t do is specify what Amazon must charge the public for it. That’s price-fixing, and it applies to wholesale distributors as well as manufacturers. Amazon can add whatever markup it chooses, or even sell it as a loss-leader.

    But I do agree with you that if the publisher is charging an abnormally high price for electronic book rights Amazon is silly not to be informing its customers of that. Because as it stands now I’m rather annoyed at them and buying many fewer e-books than before. And this doesn’t seem to be an isolated example; most of their e-book prices have gone up substantially in the last year, and I doubt that it’s all the fault of publishers.

  • Laird, given the price increase on this ebook over the course of 24 hours, I’d say you’re right about it not being all the publishers fault. I”d also point out that , as Brian said, this book is hard work. It’s not a mass-market book. You have to be pretty motivated to read it, i.e., do the work, as I am about to do. Raising your prices doesn’t seem to be the way to motivate more people to buy it.

    Anyway, as for the link, try this.
    http://www.amazon.com/Atlas-Shrugged-Centennial-Edition-ebook/dp/B003V8B5XO/ref=sr_1_1?s=digital-text&ie=UTF8&qid=1316232172&sr=1-1

    If it doesn’t work, look for Atlas Shrugged. It’s there.

  • Laird

    I see it now BJ; thanks. I’ve never seen that before, although it’s certainly possible (probable) that I just overlooked it. Interesting.

  • Paul Marks

    Matt – it is difficult to argue with you, because you have the facts on your side.

    At least inside the United States – where resistance (unsuccessful resistance, but resistance) to the growth of statism is both real and made up of many millions of people.

    As for the money creators….

    On the very day of my last comment the leading Central Banks (including the Swiss) proclaimed yes more “loans” for commercial banks.

    It is not a cunning plot to make the bankers even more hated (although it will have that effect).

    The flow of funny money is supposed to save the banks (and so on) when Greece (and perhaps others) default.

    The “saving of the financial system” is still the objective of the Central Banks.

    As it has been since the followers of the vile Walter Bagehot (third editor of the Economist magazine) won power (although they did not win the debate) so long ago.

  • Current

    “Current, I presume that you haven’t been reading any of the articles on his website, let along the book, right?”

    I haven’t read the book I’ve only read the website.

    Detlev is over-egging the pudding. There are good reasons to oppose fiat currency but there will be no collapse of it anytime soon. Even a collapse of the euro is unlikely to cause a collapse of fiat money.

  • Laird

    Yeah, I get the point that you disagree with him, Current. Beyond simply repeating yet again that tired metaphor, do you have anything substantive to contribute in support of your conclusory pronouncement? I mean, like, Detlev has, you know, written bunches of articles and a whole book on the subject, and done actual research and everything. So show us what you’ve got.