Sceptical of printing money
Here’s a must-read post by Aussie blogger Jo Nova – and it’s not on her usual topic climate change. The title says it all: The Ground Zero of Global Corruption: it starts with The Currency.
It’s like this. The governments and their central banks make as much free money from thin-air through fractional reserve banking and other methods as they can get away with — it benefits those who “spend that new money first”. They spend it at current prices, and pay it back later, after inflation has decreased its value. The people who pay the difference are those who saved and held money while its purchasing power fell. Speculators grow rich, while retirees and savers get poorer.
In a free market this would quickly lead to inflation, and people would rush to the only currencies the government can’t inflate (or “print” for free) — they’d buy and hold gold or silver and keep their purchasing power. Remember, gold and silver are the currencies that evolved in the marketplace over the last 5,000 years and are not directly under the control of government. (And “so?” you say?). The point is, if the prices of gold and silver rise fast, people would abandon bonds and get into metals instead, thus correcting the situation by making the printing and speculating game vastly less attractive while saving and production became more attractive. Essentially, people dump the government money and go for the competitor, which means the government (and or Fed) has to increase the interest rate and pay more for its money, and nobody wants that: God forbid that Governments or Banks should pay people a fair rate for borrowing “their” money.
Bonds and “treasuries” (US Treasury Bonds) are fancy words for loans to the government. But if no one wants to buy them, then the government has trouble raising funds for its massive pork barreling vote-buying schemes, and the investment bankers pay higher interest payments which takes all the fun out of Grossly Huge and Obscene Mergers, the SubPrime Parties and the High Frequency Festivals.
I had a similar awakening a few months back when I went to see Detlev Schlichter talk to a small group of (somewhat terrified) MPs about his book Paper Money Collapse in a meeting organised by the Cobden Centre. Here is Schlichter explaining why Ben Bernanke’s, George Osborne’s and the European Central Bank’s money printing experiment will only prolong the depression.
Economies are not growing because of the massive imbalances that have accumulated as a result of years and decades of cheap credit. A cleansing correction – in balance sheets, state budgets and debt levels – is urgently needed. Present policy doesn’t allow it. So the economy won’t grow.
He’s right, of course. But how do I know? I’m not, after all, an economist any more than I am a climate scientist, so why do I feel that I am qualified to comment? Why, for that matter, does Jo Nova?
I riff on this theme quite a lot in Watermelons – or Killing The Earth To Save It (Connor Court), as it’s called in the Australian edition, which I shall be shortly visiting Oz to publicise. You should read it. There’s a great section in which my old Kathy-Bates-in-Misery admirer Blobby is invoked and where I liken myself to the Robert Redford character in Three Days of The Condor (“He reads”). Anyway, all is explained there, so I’m damned if I’m going to give myself RSI regurgitating all the best bits here. Suffice to say, yes I am an Interpreter of Interpretations. It’s what I do and do well. I should have a card printed, one day.
But why should climate sceptics also be sceptical of money-printing, fiat currency, fractional reserve banking and gold and silver market manipulation? It’s a question Jo has pondered too.
If you wonder how corruption in climate science could be connected, look no further than Climate Money. Without the printing presses running flat out at the Fed, which politicians would have had the luxury of glorious schemes to control the weather? How could they hand out grants to send, say, aquariums on tour to warn of impending storms? Underneath it all, if large financial institutions were not looking forward to a brand-spanking-new $2 Trillion market to trade carbon, who would have found millions to install 70 foot Carbon-Clocks, 50 page science reports and to donate and push into “green” education campaigns? Funny money makes for funny decisions. Shame no one is laughing.
If real people had to earn real money, investment bankers would need to make real decisions, scientists would have to find real evidence, and politicians would have to come up with real reasons.
Exactly, Jo. Welcome to the Austrian School – the only economic education worth having right now.
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One thought on “Why money-printing is like ‘global warming’”
- Philip Neal says:23rd March 2012 at 9:23 pmWhat you say here may well be right, but as one free market, less government conservative to another I appeal to you not to make a big issue of questions which divide our side. In Watermelons you rightly argue that the Green ideology isn’t really about science at all, that the heart of it consists of economic fallacy about limits to growth, the nature of scarcity and the relationship between wealth and knowledge. You will do much better to focus on areas where the Left is hopelessly wrong rather than arguing about exactly which free market school – Austrians, monetarists etc – has the exact truth. Also, there are right wing cranks aplenty with fringe views about central banks, gold and so on: propagandists on the other side would like nothing better than to tar you with that brush. You are a polemicist and one of the best in the trade. Please concentrate on attacking the enemy.
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