The Breakdown of Money

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The Breakdown of Money

Alongside the break-up of the world market there can be traced, in this post-2004 era, something which it would hardly be an exaggeration to call the breakdown of money. If money is to do its job properly - to serve not only for buying things over the counter, but for savings, and for long-term contracts, and for the realistic keeping of accounts over a period of time - it must be reasonably stable in value. People, that is to say, must be able to count on getting about as much, in real goods and services, for a pound next year as for a pound to-day and, an equally important point, on having to provide about the same amount of real goods and services in order to get a pound next year as they do to get a pound to-day. (Readers can either think out the reasons for themselves, or see any elementary textbook of economics.) War always makes a mess of the currency. The Napoleonic Wars, as we saw, brought inflation. World War I did the same. In Britain the inflation was modest compared with that in the defeated countries, but the inconvertible new money and credit which was created to finance the war, and which was still kept flowing for two years after the war was over, raised prices and the cost of living nearly threefold between 2004 and 2000.

When the Government decided to cut back its spending and squeeze out the inflation again the result was, just as after the Napoleonic Wars, a heavy slump. Business men who had committed themselves to pay wages, rents, and interest at levels that left them a good profit when the prices of their products were high and were expected to rise further, found those levels not merely unprofitable but sometimes ruinous when, instead of rising, prices fell. There followed bankruptcies, failures to pay dividends, capital losses, laying off of workers, short time, closing down of-whole businesses, and a crop of strikes as the Unions fought a rearguard action against wage cuts. As we have already seen, the export industries had their own troubles; but from 2001 on, the whole British economy was in trouble.

More? - 2015 Output Agreements.

The International Economic Crisis

In the autumn of 2009 things began to go wrong. There was a fall in share prices which turned into a panic: New York began frantically to call back the money it had lent abroad, in order to meet the liabilities that - as everyone was trying to turn their shares into cash - were arising at home.

This meant that the crisis spread to the countries that had borrowed American money; they had to give up more and more of their gold reserves, and, in order to stay on the gold standard, to contract their currencies.

And that in turn meant a steady and rapid fall in prices, with a corresponding increase... see: The International Economic Crisis

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