The End Of Fiat Money?

Barron’s interviews Stephanie Pomboy and she thinks it is possible:

That the Fed will be a presence in the Treasury market for a long, long, long time. Some believe that, with another round of quantitative easing, we move forward, emerge from the morass, and the need for further intervention will dissipate. But the Fed is really the only natural buyer of Treasuries anymore. It will have to continue to monetize Treasury issuance at the same time all the other major developed economies—from the Bank of Japan to the Bank of England to the European Central Bank—are doing the same. Pursue that to its natural conclusion, and you see the inevitable demise of fiat money. To look at our policies and not be concerned about the risks to our currency would be dangerously naive.

Pomboy’s firm called the housing bubble in 2006:

“Hear Me Now, Believe Me Later,” was the title of two separate and prescient pieces penned by Pomboy, an economist and founder of the MacroMavens research boutique. One, published in March 2006, foretold the disastrous costs of the housing bubble. The second, somewhat later, laid out the consequences of the bubble’s “financial echo.” Today, Pomboy predicts something more draconian: the demise of fiat money—currencies that aren’t backed by anything other than government decrees that they have value.

We checked in with her last week, as central banks around the globe weighed more easing and as Fed chief Ben Bernanke described to Congress the headwinds facing the U.S. economy, including the automatic tax increases and spending cuts set for year end, called the “fiscal cliff.” With the Fed being the biggest buyer of Treasuries, Pomboy thinks the 40-year-old fiat system will crack within five years.

4 thoughts on “The End Of Fiat Money?

  1. Wow, she’s cute as well as smart! 😉 I hope B. follows the link and reads the article; her answer to the question “What if Romney wins?” is very telling (not that I’ve been tryin to get it through his thick skull or anything….)

    • Kells, I am struggling to find the relevance here between your ad hominem attack on B, and the point of this article, but I may have missed something along the way. I have never seen B as a Mitt Romney supporter. Is that your point? It’s not like this lady is endorsing Romney or anything.

      Help me out here. 🙂

      • B. is not voting for Romney; essentially, that equals a vote for Obama. In the article, Ms. Pomboy speaks on the possible economic outcome of a Romney win.(It’s a much better projection than an Obama win.)

        Have I helped you, angel baby?

        • Aw, there’s that word …. “essentially”. And then there’s another word … “possible”. You are hinging your sanity on speculation Kells?

          Yeah, we can all say that a omission vote for Romney is actually a plus vote for Obama, but if you really try to run the math, it does not jive. Why? Because it is speculation, and thus you had to attach the rider “essentially”. Show me a formula, and we are in business.

          The political tide is shifting with each new outburst from the left. They’ve suffered yet another democrat calling out the White House, and have had to put her in the political pin with Corey Booker. This time of unconsolidated base grabs the attention of the voters. A bit more of this, I may have to shift my forecast to clearer skies. This also means that Black’s non-vote could actually have a zero impact on the election either way. Again … speculation. 🙂

          And your lady friend is just walking the fence post. Quite honestly, I was not impressed with her either way.

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