Rodney Johnson | Monday, February 18, 2013 >>
“Oh Lord, won’t you buy me a Mercedes Benz. My friends all have Porches, I must make amends.”
That song lyric by Janis Joplin runs through my head every time I see all these Fed-apologist pundits on TV and in the paper. They keep telling us that if only we printed a lot more money, and heaven forbid don’t stop what we are printing now, the economy will recover and life will be glorious!
Is it that easy?
If it’s so darn easy to ensure prosperity, then WHY AM I STILL WORKING?! And why are YOU still working?! Why do ANY of us keep working?!
I mean, if Krugman and Blinder et al are correct, then printing money out of thin air has no consequence. There are no bad outcomes. The money just magically flows into the broad economy and all is good.
If they are to be believed, then why in the world is anyone in the U.S. still putting in a 9-to-5? Why are we not simply receiving a check, or electronic transfer from the Fed and then kicking back?
After all, it wouldn’t be that hard…
Currently there are roughly 212 million adults in the U.S. If everyone needs a couple of million dollars to be comfortable, then the Fed can simply print $424 trillion. And it can send each of these funds via tax refund because the IRS knows where everyone is anyway, right?
And speaking of the IRS, after they’ve sent along our newly printed dollars, just disband them. Who needs them?
If money can be printed with zero consequences, then just print it and ship it to the U.S. Treasury to fund government operations. What do they need a year, $16 trillion? No problem!
Of course it doesn’t work.
It would mean people have money without providing productivity on the other side. Money for nothing. When money is traded for nothing, eventually the money is worth nothing.
The problem is it’s not just the new money, printed and exchanged for nothing, that becomes worthless. When this sort of wild printing takes place all of the currency loses value. It puts goods and services out of reach of the average person by making that person’s savings and wages worth nothing.
The bad news is that this is the path the Fed is on right now.
The good news is they won’t get there.
The Fed has been as focused as possible on stealing value from savers and giving it to those who trade in U.S. government bonds, eventually handing tens of billions of dollars to the U.S. Treasury. This process has stopped what would have been a normally deflating economy. But it has left ugly side effects behind…
The newly printed money is not distributed to all Americans. It is sent to just a few. Yet, ALL of us pay higher prices for food, energy, education and healthcare. This mismatch, where some get the benefit but all get the pain, is the source of great frustration in the U.S. today.
Several members of the Fed Open Market Committee are talking about this issue, and we anticipate the Fed slowing and ending its programs long before high levels of inflation return.
Unfortunately, every day that goes by with more printing of new dollars and falling wages of Average Americans is a day too many. We are watching our standard of living fade one day at a time. That is, unless you have the ability to call upon a higher power to send you a Mercedes Benz, flat screen plasma TV, and a night on the town.
So far, those prayers aren’t being answered, and Ben Bernanke isn’t mailing me any checks.
Ahead of the Curve with Adam O’Dell
Sure… the Fed is printing money. But that doesn’t mean the U.S. dollar will become worthless any time soon. After all, if other countries are printing more… the U.S. dollar will actually go up in value.
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