Money Printing: How Counterfeiters Saved the World

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Now…back to our miserable beat…back to lies and vanity and foolishness. Back to the financial world!

If you could really make a society prosperous just by inflating the currency, Zimbabwe would be richer than Switzerland…and the Argentines would all be driving Mercedes. They’ve got 25% inflation right now. But they’re not getting rich. They’re not driving Mercedes. They’re just looking for ways not to get robbed, by buying apartments and opening offshore bank accounts.

And yet, everyone seems ready to believe that monetary inflation will make things better. Even the most illustrious thinkers in the financial world.

Here is George Soros, in The Financial Times:

“What America needs is stimulus…”

“Without a bailout,” he says, re-treading some familiar ground, “the financial system would have remained paralyzed.”

Really? What makes him think so? It looks to us as if the bailouts themselves are the source of the paralysis. Rather than let the chips fall where they may, the bailouts left the chips more or less where they were. Failed bankers still run failed banks. Failed auto executives still run failed automakers. Failed regulators and policymakers regulate even more…and as for making policy…well, we now have QE!

Printing up extra money – with no backing – used to be the sort of thing only counterfeiters did. Now it is done by the central bankers and Treasury Secretaries themselves. They don’t apologize for it. They don’t hang their heads and contemplate blowing their brains out. Instead, they’re proud of it…announcing that they “saved civilization,” or some such claptrap.

It is all so amazing…it leaves us gasping for air… Everyone seems to think he knows better what people should do with their money than the people who own it. Businesses are building up liquidity, says Soros; they should invest. Consumers are paying down debt; they should spend, says Krugman.

What? They don’t want to spend or invest? Then, we’ll steal the money from them, via inflation, and make them want to get rid of it.

This makes no sense in theory. Why should people do anything with their money other than what they want to? What is an economy for, if not to serve the interests of the people in it?

But the economic busybodies think they know better. They think an economy is supposed serve them – by doing as they demand. They want it to produce full employment, consumer price increases and positive GDP numbers – all the time. And they think they can get these things by increasing the supply of notional “money.”

It is swamp gas in theory…but maybe it works in practice? But where is the evidence? When has it ever worked?

It hasn’t. It never will.

But it sure can touch off a fire-show in the market…before it blows up the economy completely.

Bill Bonner,
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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Comments

  1. Bill Bonner and many other free market commentators often mention how it’s not possible to create prosperity for all by printing money. But I ask you, was prosperity for all ever really a central bank’s intention? I don’t think so. I believe that was never the intention of the money magicians. The intention was always to protect the elite at the expense of the masses by diluting the purchasing power of boobus americanus for the elite’s benefit. The money does eventually trickle down, but only after prices have been puffed up by the fresh money thus negating any gains in higher wages etc. Creating money only benefits those closest to the money tap: the elite.

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  2. Nathan, I presume they certainly know this. But restraint is needed in this Orwellian world to remain credible to the 99% of people who have no idea how the Babylonian Slave Trade system works in the 21st century via perpetual debt.

    Warm Regards,

    Dion

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  3. I think Bill has reasons for his approaches. He tells us how our Keynesian bankers and governments are silly etc but we know they hold wealth varying from the mildly ostentatious to the unimagineable. Reminds me of that scene in the Simpsons where Bart confidently informs Fat Tony that crime doesn’t pay…as FT is escorted into his limousine.

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  4. Bill is an unashamed storyteller, a raconteur of urban and rural truths and fables, whose instincts are sharp… and focused primarily on helping us retain the value of our money (but, as we’re told repeatedly, not _making_ any.) ;)

    However, in a world of persistent inflation, where paper money is blowin’ in the wind… and where stockmarkets may quickly fall 54.5%, his view that tangibles are at least _tangible_… is persuasive.

    Here’s the dilemma: Generalising one set of findings to a vastly different context (or continent) is the first threat to validity. So imagine how difficult it must be to protelize to Aussies! Imagine having to draw from the US experience any lessons at all. Poor Dan, Nic and that Skayce fella have to weave the dreadfully Kangaroo Edward US situation into a Strine context. Oh to be in England, or PIIGsville, where economies are already floundering like beached halibut… and Armageddon is already trumpeting alarum… . :D

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  5. When Britain puts G Brown into a prison cell for stealing the UK’s gold (selling it cheaply to his friends), then perhaps the ethical tide will turn. If not, the bubble will just keep growing and growing and growning, until someone has some guts to realise that the later it pops, the worse it will be.

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