Money, funny-money and crypto, by Alasdair Macleod

This is a great explanation of money and how money works in an economy, a shredding of Keynesian economics, a clear warning of what’s to come, and a dashing of hopes that cryptocurrencies will be the replacement for failing fiat currencies. Alasdair Macleod is one of the few economists who understands that debt is not money, that money cannot be a liability (see also “Real Money” by Robert Gore, SLL, September 9, 2015). From Macleod at

That the post-industrial era of fiat currencies is coming to an end is becoming a real possibility. Major economies are now stalling while price inflation is just beginning to take off, following the excessive currency debasement in all major jurisdictions since the Lehman crisis and accelerated even further by covid.

The dilemma now faced by central banks is whether to raise interest rates sufficiently to tackle price inflation and lend support to their currencies, or to take one last gamble on yet more stimulus in the hope that recessions can be avoided.

Politics and neo-Keynesian economics strongly favour monetary inflation and continued interest rate suppression. But following that course leads to the destruction of currencies. So, how should ordinary people protect themselves from currency risk?

To assist them, this article draws out the distinctions between money, currency, and bank credit. It examines the claims of cryptocurrencies to be replacement money or currencies, explaining why they will be denied either role. An update is given on the uncanny resemblance between current neo-Keynesian monetary inflation and support for financial asset prices, compared with John Law’s proto-Keynesian policies which destroyed the French economy and currency in 1720.

Assuming we continue to follow Law’s playbook, an understanding why money is only physical gold and silver and nothing else will be vital to surviving what appears to be a looming crisis in financial assets and currencies.


With the recent acceleration in the growth of money supply it is readily apparent that government spending is increasingly financed through monetary inflation. Those who hoped it would be a temporary phenomenon are being shown to have been overly optimistic. The excuse that its expansion was only a one-off event limited to supporting businesses and consumers through the covid pandemic is now being extended to seeing them through continuing logistics disruptions along with other unexpected problems. We now face an economic slowdown which will reduce government revenues and, according to policy planners, may require additional monetary stimulation to preclude.

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4 responses to “Money, funny-money and crypto, by Alasdair Macleod

  1. “Since John Law and his Mississippi Bubble, individuals have been continually appearing with the same scheme in new disguise. The principle is very simple. You have only to find a way to multiply your creditors by the
    cube and pay them by the square, out of their own money. Then for a while you are Nabob.

    The fatal weakness in the scheme if that you cannot stop. When new creditors fail to present themselves faster than the old creditors demand to be paid off, the bubble bursts. Then you go to jail like Ponzi, or commit suicide like Ivar Kreuger.

    There is nothing new in the scheme. What is new is that for the first time the whole world tried it. The whole world cannot put itself in jail nor can it escaped the consequences by suicide.” – “A Bubble that Broke the World,” Garet Garrett, 1932.

    As you understand, Robert, were I King and could command such things, I would make Garrett’s book – particularly the chapter entitled “Anatomy of the Bubble,” together with the 4 brief pages on gold, MANDATORY in order to receive a High School diploma!



  2. Commenting on the nice comment above…
    I wish there was a way to know when this thing pops…
    It is all the more difficult to predict as the number of players are world-wide
    Thanks Robert for the post…
    If you ever start something like a citizen army, you have one volunteer…


  3. “The fatal weakness in the scheme if that you cannot stop. When new creditors fail to present themselves faster than the old creditors demand to be paid off, the bubble bursts.”
    Since there are not enough new creditors money creation is in full throttle. To make sure all escape hatches are shut, you have electronic currency (probably soon made fully official and required just like this demented vaccine), a regime of real negative interest rates and this new 600$ transactional monitoring.
    Almighty help us!


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