Friday, September 24, 2010

Stealth Monetization in the U.S.A.

I found Gonzalo Lira a few months ago and he is now one of my favorite bloggers. His pieces on economics are pure genius, or at least they agree completely with my positions. Those two ideas couldn't be mutually exclusive, could they?

So I am going to publish a teaser of his latest article: Stealth Monetization in the U.S.A., that clearly demonstrates how the Federal Reserve Bank is creating vast amounts of new money and seriously endangering the survival of the dollar. Below the teaser is a link to Gonzalo's blog.

Insofar as money is concerned, governments and central banks should be kept as far away from one another as a pedophile from Dakota Fanning. If ever the twain should meet, very bad things would happen. This is because of the disparate natures of government, on the one hand, and the central bank, on the other.

Governments spend money. They spend money on social programs to keep the people docile and happy, wars to keep up the illusion of safety and security, and—almost as an afterthought—infrastructure. Ordinarily, they get the money for all of these things from taxes and other fees that the government collects.

On the other hand, central banks print money. Most of the world’s economies depend on fiat currency—currency that has value because someone says it has value. The person who says it has value is the central bank. They are the custodians of the currency—they take care that it retains its value.

Tons of people say that a fiat currency is unstable, and doomed to fail, and that we will all rue the day that we accepted that abomination into our lives!—and blah-blah-blah, rant-rant-rant.

For the rest of the article click here

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