San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Monday, February 2, 2015

The Big Lie About More Money

I believe it to be true that most citizens in the Socialist Democracy of Amerika have no understanding at all of economic principles.  This is especially true when it comes to economic pronouncements that are made by the evil folks at the Federal Reserve.  The non-stop litany of economic gobbledygook that spews forth from the Fed is enough to make anyone's head spin.  I believe it is designed to be that way as a direct attempt to confuse and obfuscate the issues at hand.  The more confused the citizenry remains the more the Fed can present itself as the wise and beneficent government agency that is always looking out for our welfare. Meanwhile, as the Fed pulls the wool over our eyes, the government propaganda machine continues to attack profit seeking businessmen, blaming them for every economic malady that comes along.  It is time for me to reveal the biggest Fed secret.  It is time for me to tell you about the big lie about money.
A "central bank" is simply another term for a government bank.  Many nations around the world have central banks and in every case the central bank is a branch of the national government.  There is no constitutional justification for the existence of a central bank.  There is also no economic reason for the existence of a central bank.  And from the perspective of the citizens living in the land, there is no economic necessity that brings about the need for a central bank.  There is one, and only one, reason why central banks have been brought into existence and that is to provide a never ending stream of counterfeit cash to the government.
In the SDA the central bank is called the Fed.  The Fed was created to allow government to spend more money than it takes in, thus allowing career politicians to purchase an ever increasing number of votes and thereby guaranteeing their positions as "career" politicians.  The government has only two ways of raising funds.  The first is taxation.  Taxation, for obvious reasons, is unpopular.  Taxation makes it highly likely that the citizens subjected to it will rise up in rebellion and throw the rascals out.  So rather than tax people straight up, some brilliant economists at the government cooked up the idea that it could be possible to borrow an limitless supply of money from a government owned and controlled bank.  The Fed was born.  Whenever the government needs more money, which is all of the time, it goes to the Fed and takes out a "loan."  A loan from the Fed is created when the Fed "buys" a bond from the Treasury.  I think we all understand what it means to buy a bond.  You can go out today and buy a Treasury bond.  The difference between you buying a Treasury bond and the Fed buying a Treasury bond is that you spend your own money to purchase the bond whereas the Fed simply creates the money out of thin air.  The creation of money out of thin air, which is then given to the SDA Treasury to be spent by the federal government in order to secure political power, is alternatively called counterfeiting, inflation and monetary policy, depending upon who is telling you about it. 
Career politicians and government bureaucrats are aware that fessing up to the public and admitting that the central bank exists only to give counterfeit money to the government will likely get them into hot water so they have concocted a pantheon of lies to hide what is really going on.  They have been extremely successful in propagating their lies and today hardly a single economist can be found who disagrees with the government line.  We need to consider a couple of those lies.
Fed economists claim that the economy grows by means of consumption.  How many times have you heard the mantra that "the economy is 2/3rds consumer spending"?  Economic growth, according to economists who receive pay checks from various government bureaus, is a direct result of consumers spending more money.  Now let me ask you a question.  Does that make any sense to you at all?  It helps to equate what the government does to your own family budget.  How do you increase the size of your net worth?  Does your net worth go up when you spend more?  Is it the case in your family that the more you spend the more rich you become?  Everyone can see the lunacy of that belief and yet, when it comes to government economists at the Fed, that lie is taken as gospel truth.  Economic growth is not the result of consumer spending.  All economic growth is the result of savings and investment.  Investment is taken by financial intermediaries like banks and insurance companies and distributed to businesses and entrepreneurs via loans who then apply their labor to capital in order to create goods and services which are then sold to consumers for a price they are willing to pay.  I realize that was a long sentence to read but it accurately summarizes the free market.  Take away investment and the economy collapses.  Investment, not spending, is the key to economic growth.
Government economists at the Fed tell us (I don't think they really believe what they tell us because I can't believe anyone could be that stupid) that when we don't spend enough  money the economy begins to stall.  In order to prevent a recession, or a decline in economic growth, they inform us that they need to stimulate the economy back to growth.  How do they attempt to stimulate the economy?  They create more money.  No matter what the economic illness might be the drug of choice to cure the sickness is always more money.  The prescription never changes.....more money, more money, more money.  We have now come to the big lie that is foisted upon citizens around the world by their central bankers.  We are told that more money will stimulate economic growth.  Everyone apparently believes that to be true and only an idiot would dare to stand up and declare that the economic emperor has no clothes.  Well, I am here to tell you that the emperor has no clothes.  More money never has and never will create economic growth.  All more money does is give the government more money to spend in order to buy more votes for career politicians.  The end result for the consumers is that the currency continually devalues through a process called inflation.  The government gets richer and the citizens get poorer.  The battle, my friends, is not between you and big business.  The battle is between you, the government and its central bank.
Let's think about your family once again.  I want you to consider what would happen if we had a total of $100,000 in our economic system.  Imagine that our economic system consists of ten families and that the $100,000 is held by all ten of those families.  If you are an egalitarian imagine that it is divided equally.  If you are a capitalist imagine that the money is divided unequally.  It really does not matter how it is divided.  As each of our families continues to produce goods and services we would discover that the price for those goods and services would continually go down.  Our increased productivity in an economy where the supply of money is constant will inevitably result in an increase in the value of our currency and the associated decrease in prices for the goods sold.  As time goes on the currency continues to strengthen and our economy, despite experiencing the dreaded "deflation," gets stronger and stronger every day.
Then one day one of the ten families decides it is time to act immorally.  That family renames itself "government" and creates a printing press in its basement from which it prints counterfeit money.  They call their printing press "the Fed" and they call the printing and distribution of counterfeit money "stimulative monetary policy."  They attempt to convince the rest of us that we are all better off because of their counterfeiting.  Do you believe them?  You shouldn't.
If the "government" creates an additional $10,000 and spends that money into our economy we will all see an immediate reduction in the value of our dollars by 10%.  Conversely, to adjust for that decreased purchasing power, the prices of things in our economy will go up for the first time.  They will rise by 10% to accommodate the counterfeit money.  Who has benefited from this process?  Certainly not the other nine families who have seen their wealth decline by 10%.  The only beneficiary, in the short term, is the "government" family.  As that family spent the new money, buying goods at the older, lower prices, they effectively stole from the rest of us.  Of course we figured it out and raised the prices.  That means the "government" family will have to continue to print counterfeit money in order to maintain their competitive advantage over the rest of us.  This is precisely what the Fed does in the SDA every day of the year.
As bad as things are in the SDA, the Japanese have turned counterfeiting into an art form.  After decades of printing money in a vain attempt to stimulate the Japanese economy the country now carries a Debt/GDP percentage of 227%.  For comparison purposes the Debt/GDP ratio of the SDA is 103%.  Despite all of the funny money circulating around Japan the economy is still in a permanent recession.  The problem with Japan is not an insufficient money supply.  The problem in Japan is an almost complete lack of free market capitalism.  You would think that the empirical evidence alone would be enough to convince government central bankers that more money never solves any problems but such is not the case.  The reason for that is simple.  Central bankers are not concerned about the economy.  They are concerned about providing a steady stream of money to the government so all of the government's vote buying programs can continue to operate.
The big lie about money, whether it be called Quantitative Easing, accommodative monetary policy, injecting liquidity, open market operations, increasing the Fed's balance sheet, stimulating commercial loans or monetary easing, is that all operations of the Fed which increase the supply of money inevitably result in an act of theft from the citizens and a transfer of wealth to the government.  Everything that comes from the various mouthpieces at the Fed is a lie and scarcely one in a thousand people are even aware of it.  You should be that one in a thousand.

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