In 1971 Richard Nixon abolished the gold standard. Since then the value of paper money has gone down by roughly 90%.
At the same time that this devaluation in paper currency was taking place, credit availability (read indebtedness) was increasing exponentially. Individuals and nations went berserk.
In 2008-2009 the descending line and the ascending trajectory crossed paths. The result was explosive. The world had seen nothing like it since the Great Depression of the last century.
What we are going through, at the moment, is a process of deleveraging. It took us years to get to the crisis point and it will take years to return to normality. We should avail ourselves of this opportunity to rethink our policies.
This morning the IMF warned the G7 that further fiscal tightening is inevitable.
I'm so glad that they finally said something. I was already beginning to feel like the only fool around. And, believe me, that's a very lonely place to be.
