Worried commentators are predicting a massive hyperinflation of the sort suffered by Weimar Germany in 1923, when a wheelbarrow full of paper money could barely buy a loaf of bread. But there is something puzzling in the data. The British government is already funding more of its budget by seigniorage than Weimar Germany did at the height of its massive hyperinflation. Yet the pound is still holding its own, under circumstances said to have driven the German mark to one-trillionth of its former value. Something else besides mere money-printing to meet the government’s budget must have been responsible for collapsing the German mark, but what? And are we threatened by the same risk today?
Read more here –
http://www.webofdebt.com/articles/hyperinflation.php
Filed under: Ellen Brown Articles/Commentary |
WEB OF DEBT BLOG 
Ellen:
With respect to Weimar and Hjalmar Schacht’s observations on short sales of the deutschmark, was the deutschmark ravaged by NAKED short-selling? What would naked short-selling of a currency look like? Is the funneling of bailout money through AIG to counterparties in credit default swaps a form of short-selling the dollar, in your opinion?
As an historical point, Hjalmar Schacht was one of three men acquitted at the Nuremberg Trials. My godfather, Newton Friedman, sought Schacht’s prosecution in Federal German courts after the war. Schacht was found guilt of sub-capital offenses, but his conviction was overturned.
Interesting history! My understanding is that it was “covered” short selling. That’s why there was the manic printing of marks, to cover the sales. The speculators would sell first and cover later. I don’t see the AIG CDSs as a form of dollar short-selling. AIG thought “real estate never goes down” and that they could just sit back and collect free money selling protection against a wave of defaults that would never occur. It was called the black swan event, the thing no one could foresee; but for ordinary housewife-type observers, it was a white swan at best, maybe a duck. It was obvious.
Yet another great article that EVERYONE needs to read and understand. There is nothing going on in our world today any more important that addressing the question of who issues and controls our money.
Private money creation is killing us.
Good start on a very timely topic: “How the Fed ends” You did neglect to supply some very important facts re: the Weimar inflation, other than those naught currency speculators. The WW1 treaty stipulated Kaiser Germany was to turn all productive assets (mines, mfg plants in the Ruhr Valley, RR locomotives, steamships, etc, etc) to the allies. And pay the reparations as well.
This is where your premise falls apart. Without productive assets to earn a true national income, and stripped of any possibilities, AND (stupidly) given a reparations demand of reichmarks only…per the written terms of the surrender, they did the prudent, albeit disastrous, thing—>they printed money & delievered on the written T&C’s. Cash on the barrel. FDR before becoming Gov of NY worked for those speculators who sent him to Germany w/the DM’s to buy up antiques & works of art they later resold in the roaring 20’s.
But how the Nazi’s ended it is most instructive….more needs to researched on this. Our modern society borrowed lots of concepts from that gang: scientific, military, environmental, municipal, etc, etc. The only “ism” of the 20th century that didn’t die of its own implosion…it had to be ripped out by the roots fully formed.
What brought about the rampant inflation that took place at the end of the War of Indedendence?
Was the inflationary period before or after the time “bankers”, started creating the money?
This is a good article…If we could create a system of Goverment created money and thus keeping it out of the hands of the international bankers, that would be good.
We have to do something, or the bankers will get what they want. A World Bank run by them.
Hi, I have a chapter on that. It was (a) massive counterfeiting by the British, who had ships with printing presses on them in the NY harbor; (b) having to compete with other stronger currencies; and (c) speculation.
Mike Whitney asks: “Do people realize that the reason their home equity is vanishing, their 401ks have been slashed in half and their jobs are at risk is because Wall Street was gaming the system with leverage and financial innovation? The current downturn is not really a recession at all; it’s more like a self-inflicted wound perpetrated by avaricious speculators who put a gun to the economy’s head and blew its brains out.”
Likewise did the victors of WWI pursue a vindictive policy against prostrate Germany with onerous reparations ( our huge national debt ) AND speculative exploitation of the currency (“innovation”). Today’s speculative activity looks like financial war against the American people by a victorious enemy, that same victorious financial class. But the wound is “self-inflicted” because the American people have bought into the ideology of the financial class. We’re all speculators, a few more avaricious than others. We’re all “investors”. This is why the financial bail outs are an easy sell and genuine Populist outrage so muted.
It seems the only way out of the usury system upon which so many millions depend for “investment” income is the destruction of that system and the emergence of sovereign credit, the greenback solution.
Hitler was a populist. Let’s not forget that.
Good points all! Yes they roped us all into the stock and bond market, and now we’re afraid of rocking the boat. Clever of them!
Gary North, whose work I actually like and have quoted in my book, did a rather scathing critique of this article on his website. An interested reader who lives in Europe near the scene of the events, who prefers to remain anonymous, did a very good response to it, but I could find no place on North’s website to post a response, so I’ll put it here:
North is an extreme Austrian school libertarian without academic training in economics/finances. Don’t take him very seriously.
“I am an Austrian School economic analyst. My formal academic training was in history (Ph.D). Since 1974, I have edited the financial newsletter, Remnant Review. I formerly served as Research Assistant for Congressman Ron Paul (R-TX).”
His argumentation is very evidently colored by his convictions and very emotional. He judges the quotes not from their true content but from who did it. That is, Shacht being a fascist, is fundamentally unreliable. North takes for granted that the free unbridled market is a holy innocent saint that grants the paradise of Eden.
The argument that speculation was not the initial cause is unconvincing
“…the argument was refuted as long ago as 1931, in the still-definitive book, The Economics of Inflation. The author reports:
“The accusation that the collapse of the German exchange was provoked by bold groups of professional speculators seems better founded. The objection to that is that speculation cannot be the original cause of the depreciation of the currency of a country. On the contrary, speculation appears when for certain reasons…[and then follows the common Austrian school argumentation]”
The great weakness of this argument is that the shortselling was tremendously intense, starting over night. This is not the way “the market spontaneously and rationally responds” according to libertarian/austrian school theory. It is the pattern of a planned and intentional attack by a powerful operator with the purpose to destroy the economy.
I believe the Robber Barons, Harriman and Rockefeller, precipitated the Weimar Hyperinflation through concentrated short-selling as the final blow against German economy [for another instance, see footnote1]. Its destruction was initiated by their proxy, John Foster Dulles [see footnote2], who enforced such impossible financial conditions on Germany in the Versailles WWI peace treaty that destruction of the German economy was inevitable. The Robber Barons, after finally sinking the ship through the hyperinflation-generating attack, made one of their traditional shopping sprees, bying valuable German industries at firesale prices.
Footnote 1)
I also found this, indicating that intentional starting of hyperinflation has been used in at least one instance – by communists who may have learnt it is a useful “revolutionary instrument” from the Weimar case.:
“One source [2] states that this hyperinflation [in Hungaryy 1945] was purposely started by trained Russian Marxists in order to destroy the Hungarian middle and upper classes.”
[2] ^ Ragan, Christopher; Lipsey, Richard (2008). Macroeconomics. Toronto, Ontario, Canada: Pearson Education Canada. pp. 645. ISBN 0-558-05845-0.
Footnote 2)
About Dulles:
“In 1936, the company Schroder, Rockefeller Investment Bankers, included board directors linked to the Gestapo and several European, Nazi-linked banks. It’s lawyers were John Foster Dulles and Allan Dulles… The Dulles law firm represented I.G. Farben and Fritz Thyssen…”
http://coat.ncf.ca/our_magazine/links/53/rockefeller.html
RE. TOXIC TEXTBOOKS,
This website will be of interest. I also contribute to the forum on Facebook dealing with the subject of “toxic textbooks” in economics which have played a vital role in the present financial crisis………………..
http://www.toxictextbooks.com/
RS.
Ellen!!
You claim North is “.. without academic training in economics/finances. Don’t take him very seriously.”
With respect, and correct me if I am wrong Ellen,you ,yourself do not have any training in economics/finances as well?
The same is true for myself, and my work on Transfinancial Economics but I hope to get validation for my concepts from a number of open-minded economists including an American Professor from Rutgers University.
Please do not the above wrong way!
I didn’t write it, a reader did who wrote to the “contact us” button. I can trim it down and omit that part if you’d feel better about it. This sounds like sour grapes, but I honestly think we on the outside looking in have a clearer perspective on many economic issues than people so trained in the details that they’ve lost sight of the forest. In any case, I do have SOME training in the field. I have a J.D. in law and practiced contract law in a firm for ten years, and on my own in several cases after that (while we were abroad in the foreign service). My contention is that “money” and “credit” are nothing but legal agreements between parties, and that a judiciary-like government agency, not private banks, should be in charge of creating, overseeing and administering both.
Robert, A careful reading of Ellen’s post should settle your misunderstanding. She was quoting an anonymous responder to North’s article.
“An interested reader who lives in Europe near the scene of the events, who prefers to remain anonymous, did a very good response to it, but I could find no place on North’s website to post a response, so I’ll put it here:”
Furthermore, anyone with a computer and the motivation can read and study all the economics needed to qualify for a masters or doctorate in just a few years. I personally think getting too deep into the nuts and bolts of microeconomics can damage one’s mind. I’ve personally seen overwhelming evidence that this is true. Most microeconomics is junk put out by the moneychangers in order to deceive the masses.
I’ve studied political economy and the philosophy of economy in my own independent online manner for 20 years now, and have been able to sort much of the wheat from the chaff for a long time now. There is no substitute for a good reading program. Look at what it did for Thomas Jefferson. 😉
There has been a discussion over at the Social Credit list regarding the veracity of the numbers in the Hutchinson article that Ms. Brown sources:
http://www.geocities.com/new_economics/well_researched_article.txt
Hutchinson claimed that the Weimar government printed half the money they spent (50%), implying that half was gathered conventionally. William B. Ryan cited the economist Hans Sennholz in stating that the actual number was 99.2%.
Hutchinson claimed that the British budget was £454 billion. Jamie Walton stated that the actual number for 2008 was £620.7 billion for 2008, and £671.4 billion for 2009. Walton hyperlinked to actual British government statistics.
Even accepting the £300 billion per annum of printed money for the purchase of gilts as being an accurate number, this would by no stretch of the imagination be anything close to the Weimar experience, when the true numbers are factored into the calculation.
And the premise to Ms. Brown’s question has been extinguished:
“If Britain is already meeting a larger percentage of its budget deficit by seigniorage than Germany did at the height of its hyperinflation, why is the pound now worth about as much on foreign exchange markets as it was nine years ago…?”
Silas Kline
Silas, This is the kind of infinite nitpicking that is to be expected from anyone on that list, whose intentions have been repeatedly exposed as “false flag” operatives. They pose as “Social Credit” advocates while actually being nothing of the kind. Their only purpose is confusion and deception on issues involving money and banking reforms.
Let me pose a question to you. Exactly what kind of money reform do YOU think is needed? What are YOU FOR? What are your ideals as far as money is concerned?
Now extend those questions to the so-called “Social Credit” enLISTees like yourself, Brock Moore, WB Ryan, Peter Hogwood, and the rest of that gang. What are you all FOR?
I do not really expect a meaningful answer, as the question has been asked and ignored many times So I will offer my own answer.
You are for the “status quo”, just as it is, except with more of the wealth of the people being transferred to them and their masters, even more quickly. That is what they are FOR. They aren’t satisfied stealing it by the billions. Now they are doing it by the trillions, and have hijacked the major governments of the world to help then get it all.
Finally, as to your assertion that: “the premise to Ms. Brown’s question has been extinguished: “If Britain is already meeting a larger percentage of its budget deficit by seigniorage than Germany did at the height of its hyperinflation, why is the pound now worth about as much on foreign exchange markets as it was nine years ago…?”
It has been “disputed”, NOT extinguished. Some people are capable of recognizing the difference in terminology. Far more information is needed. For example, was that 99.2 % the terminal number? And if it were, how would that invalidate EHB’s central point of the analogy?
As I read it, that point was that direct monetary issue, or seniorage (there are many shades of meaning to the term) DOES NOT HAVE TO BE INFLATIONARY. It all depends on HOW the money is issued and used.
If seniorage is used to buy production and growth of goods and services, it is NOT inflationary, as is contended by most critics of public money creation today. That is the point, as I see it, and nothing your gang of nitpickers can produce can “extinguish” that valid point.
I speak only for myself, and my understanding of the point of the article under consideration. I do not speak for Ellen H Brown.
“It has been ‘disputed’, NOT extinguished. Some people are capable of recognizing the difference in terminology. Far more information is needed. For example, was that 99.2 % the terminal number? And if it were, how would that invalidate EHB’s central point of the analogy?”
—————————————————
—————————————————-
But Ms. Brown, in sourcing the goldbug marketer of “investment advice” Martin Hutchinson, said that “50% of [Weimar] government spending was being funded by seigniorage…at the height of its massive hyperinflation…” The economist Hans Sennholz says that the actual number was 99.2%. The difference completely refutes EHB’s central point. The question is, do you believe in facts, or are you a type of religious zealot to whom facts are irrelevant? It seems to me that if you were rational, you would seek evidence as to what the number actually was, rather than act reflexively to contrary information. You are simply trying to shout down dissension.
–
“I speak only for myself, and my understanding of the point of the article under consideration. I do not speak for Ellen H Brown.”
—————————————————
—————————————————-
Well, thank goodness for that. But I must question the judgment of someone who appoints a person with the mindset of paranoid Chief Inquisitor as moderator of the discussion list. No wonder discussions are not going on there.
–
“You are for the /status quo’, just as it is, except with more of the wealth of the people being transferred to them and their masters, even more quickly.”
—————————————————
—————————————————-
Now, you don’t know that. It is a pure libelous statement. And it’s out of place in a forum between supposedly civilized people.
It appears to me that your source assumes something that can’t be assumed:
“While government expenditures rose by leaps and
bounds, the revenue suffered a gradual decline
until, in October 1923, only 0.8 percent of
government expenses were covered by tax
revenues. For the period from 1914 to 1923
scarcely fifteen percent of the expenses were
covered by means of taxes. In the final phase of the
inflation the German government experienced a
complete atrophy of the fiscal system.”
“So, according to Sennholz, in October 1923, only
0.8% of government expenses were covered by tax
revenues, which means that 99.2% were not. I
would presume that most if not all of that 99.2%
was covered by the printing of money rather than
conventional borrowing. In any case that would be
far greater that the 50% that Huntchinson claims
was ‘Weimar policy.'”
Here’s a source from your Mises site —
http://www.mises.org/web/4016#pg68
I spent a half hour reading it and felt I had to quit as there are more pressing issues to address (the Financial Stability Board of the BIS, the subject of my next article, is a looming threat), but I gleaned from what I read that taxes were not being paid because nobody had the money to pay them. Governments routinely borrow, not print, what they don’t have. The Mises article indicates that it was the Reichsbank that was doing the printing, and the Reichsbank was privately owned. It also indicates that speculation on foreign exchange markets was the root cause of the problem. Economist Michael Hudson states, after careful research, that every hyperinflation has resulted from foreign debt service:
http://finance.groups.yahoo.com/group/gang8/message/14115
A note regarding “Silas Kline”, and his many aliases and/or associates, at the various “social credit” lists and urls they use.
I could get into a detailed refutation of Mr. Kline’s online assault on my person an character. That is what he wants, and I refuse to oblige him.
Brock Moore, William Ryan, Peter Hogwood, Silas Kline, and a variety of other AKAs were banned from the WoD Forum for slanderous ad hominem attacks. They, except for “Silas”, have also been placed on the moderation queue here, and for sound reasons that could fill book, but which reduce to obstructionism. These people are extremely clever and well-educated “false flag” operatives, posing as monetary reformers, whose agenda is to obstruct any efforts at meaningful money reform, or even education about money and banking.
Those who are interested in alternative money systems and money reforms are not surprised that such opposition and obstructionism takes place. We, or at least I, fully expect that it will.
We are prepared to openly discuss any and all sincere ideas that might resolve some of the dire impending consequences of an unsustainable PRIVATE money and banking system.
However, we, or at least I, do not believe we should be wasting valuable time and energy endlessly responding to “false flag” nitpicking and hair-splitting on points of issue that are not relevant to our central issues and intentions: eliminating heartless and senseless exploitation and predation from our monetary system. This is even more egregious when those doing the “nitpicking” are insincerely posting as something they are not; they are “wolves in sheep’s clothing”, whose intent is deception and misdirection.
I will always welcome and tolerate honest and sincere discussion that is relevant to the objective of finding an alternative to the nefarious globalist economic agenda that will be under the control of private bankers who are accountable to no one. Everyone is entitled to their opinions. However, they are not entitled to their own facts. Nor are they entitled to use clever selection (cherry picking) of “facts” and “out-of-context” snippets to distort reality, or misrepresent the truth. That is the way this current banking system was “hacked in” through the “back door” of our constitution.
When I see the same people repeatedly posting with red herrings, ad hominem attacks, circular and illogical arguments, and all manner of sophistries that are meant to distract and misdirect, then I will do my best to stop it, as I did with Mr. Kline, AKA Moore/Hogwood/Ryan, et al, on the WoD Forum.
I have better things to do with my time than referee “tag team” assaults on constructive efforts towards money reforms or alternatives, especially when they are unknown assailants using the anonymity of multiple aliases (personalities?) or screen names.
Jere,
I see you have woken up! I did publicy warn Ellen Brown about “Ryan”, and his many aliases, and asked her to ban him which ofcourse she did not do. Unfortunately ,ofcourse he pops up again using another name!
As far as I understand it he, and his other egos are obssessed in rubbishing any monetary reform that in some way contradicts Social Credit.
Ofcourse, he tried to do this with TFE, but he, or his other egos will not succeed.
Richard Cook believes that Ryan is some kind of agent!. Yet, no matter how successful, or respectable the former maybe he seems to have joined the “lunatic fringe” of the conspiracy theorists……………
To: Ms. Brown
[Edited for personal insults]
I merely [asked] a question about the veracity about a certain fact that was initially claimed by Martin Hutchinson, then picked up by you in your essay.
Hutchinson had claimed that fifty percent of the spending by the Weimar government had been through “seigniorage.” William B. Ryan, in his posting to Social Credit,
http://www.geocities.com/new_economics/well_researched_article.txt
quoted the economist Hans Sennholz in reporting that:
“While government expenditures rose by leaps and bounds, the revenue suffered a gradual decline until, in October 1923, only 0.8 percent of government expenses were covered by tax revenues. For the period from 1914 to 1923 scarcely fifteen percent of the expenses were covered by means of taxes.”
Ryan challenged several other points in your essay.
–
“It [meaning the Fergusson book at the Mises site] also indicates that speculation on foreign exchange markets was the root cause of the problem.”
—————————————————-
—————————————————–
I am skeptical that an “Austrian” economist made this claim, that it was the “root cause.” They are fanatical in believing that speculation is a good thing inherent to the “free market.” Will you please cite the page number on which this claim is made? I will reserve my interpretation of the cited text until I have read it.
You then go on in citing Michael Hudson in saying that hyperinflations are caused by the necessity for foreign debt service, in which governments print money so they can purchase the foreign currency needed to make the debt service.
You must realize that this is a completely different argument than the one made by Schacht and the Zimbabwean central bank that their respective hyperinflations were caused by foreign currency speculation.
I believe that Schacht’s and the Zimbabwean central bank’s explanations were self-serving to divert the responsibility for their respective fiascos from their own actions.
It seems to me that if you print money in order to purchase foreign currency, you are going to affect the value of the currency you print in respect of that foreign currency, regardless of whether or not there is speculation.
Hi, the problem for me is that I’m super busy. If I don’t jump in and argue, it looks like I’m conceding the point; but if I do, that’s all I get done, and I’ve got a stack of other things to do that are actually more important. How I want to tackle this hyperinflation scare in my next article is to point out that 45% of the world’s wealth just disappeared. The fact that the Fed is “printing” money is nothing new and outrageous — it’s what banks do every day, and how our money supply is maintained. Our money supply IS nothing but “credit” created with accounting entries by banks; and now the banks aren’t doing it to the extent that they were before, so it’s actually a good thing that the Fed is stepping in and filling the breach. We can argue about historical details, but more important is what is happening now. The whole world is liable to panic and rush out of U.S. bonds, thinking we’re going to default on our loans. We’re not. We’re going to pay them in perfectly good U.S. dollars. And they ARE good dollars; the money supply has not been hyperinflated but, to the contrary, if anything is depressed and deflated. It NEEDS pumping up. I’m no fan of the Fed, but in this case I think they’re doing the right thing. Ellen
Robert, I awoke long ago. A search of my posts would show that I’ve long recognized that the “Social Credit” forums on elistas and geocities are shams, and have said so. They basically use the impenetrable econospeak in Douglas’ A + B Theorem to dazzle and confuse people trying to get their heads around the real money issues. They put Alan Greenspeak to shame! He, Greenspan, can’t hold an Orwellian candle to those who speak in A+B Theorem terminology.
You appear to be saying Richard Cook “seems to have joined the “lunatic fringe” of the conspiracy theorists”?
If so, I would have serious objections to that assessment. Very serious indeed.
Richard C Cook has written extensively on reforming our monetary policy, and I regard him right up there with Ellen H Brown, Stephen Zarlenga, William Still, and others calling for public control of money and money creation.
Could you possibly be under some illusion that the international central bankers have no agents?
Or that someone who suspects those engaged full time in supporting the status quo in money and banking may be “agents” are “conspiracy theorists?
If this is true then I would suggest that you should read Ellen H Brown’s Web of Debt, Zarlenga’s The Lost Science of Money, and watch these Cook Videos All these are about conspiracies.
Conspiracies are real. They exist. They have always existed. Conspiracies have steered history. Almost every major event in history has been steeped in conspiracy of one kind or another, including the American Revolution to name but one incident among millions. Get used to it.
Monopolies, cartels, syndicates, oligarchies, plutocracies, etc., all exist though collaboration, legal or illegal, moral or immoral. Just because those in power rewrite the laws to “legalize” their crimes does not mean their collaborations are not “conspiracies”, except withing the narrow letter of the law, rather than the spirit or intent of it.
Normal people know the difference between right and wrong. They do not need legalisms to sort it out. That is how the highest levels of criminals exploit the unlearned masses: by legalizing their crimes.
Legalizing criminal activity does not make it right, and most children know that.
Jere, et al,
Ofcourse I believe in conspiracy theories if there is a good chance that they are credible. An excellent example is Shell possibly “indirectly” conspiring with an African government to have certain activists murdered. Another that springs to mind is ofcourse the Iraq war probably started by a deliberate lie about the alleged existence of weapons of mass destruction.
However, many conspiracy theorists become obssessed to the levels of insanity notably when there is little, or indeed no evidence to support their claims. In other words, the lunatic fringe who are unfortunately quite a common phenomenon on the internet.
Ofcourse, I discovered on the Zeitgeist site that there are even people who believe that Transfinancial Economics is somekind of conspiracy by the rich, and super-rich to control the world!! How dumb does it get?Admitedly, TFE could be misued if it ever became a future reality. But you do NOT need be a conspiracy “nut” to tell you the blindlyOBVIOUS!!!
The insidious conclusion of the U.S. debt financing is carefully concealed from the public.
If Congress wishes to spend more money than they have, they grant securities (bills, bonds, or notes) to the Fed and the Fed establishes a line of credit in the amount of the involved principal. Presto!! Fiat money has been created—by an act of Congress. Every “dollar” in circulation is created in this manner. The accumulated line of credit is of course the National Debt.
The U.S. Treasury assists the Fed in selling a large percentage of the debt to the public. This act mitigates the immediate inflationary pressure by returning some of the fiat money from circulation back to the vaults of the Fed.
The subtle mathematically progression will escape the casual reader. The agreement is taunted for the security will be paid off and the debt canceled. The principal has been created but the promise is to repay the principal PLUS the interest. The interest does not exist. It is impossible to culminate the agreement. Any agreement that cannot be culminated is an act of fraud and void from its inception.
The only way to pay the interest on the initial issue is to issue additional securities for more principal and pay the initial interest from the secondary issue of principal. If the debt roll-over remains a constant value, the interest deduction in the secondary issue effectively reduces the amount of fiat money available for government programs, so the effective interest rate on the secondary issue is higher than the taunted percentage. And each time the debt is rolled over, the percentage increases. It is an exponential increase. (Note: This progression does not apply to a loan from Main Street Bank.)
To hide the increase in interest payment from the public, the national debt must be increased. But the increase in the national debt increases the cost of interest that must be paid. The exponential increase cannot be outrun. The inescapable conclusion is runaway inflation. It has occurred many times in history. It is mathematically inescapable. And Bernacke knows it.
This mathematically progression is the hallmark of any Ponzi scheme. All Ponzi schemes are doomed to eventually self-destruction.
Welcome, Old Reb.
These are unusually keen perceptions and insights. You are right that they are out of reach of all but the sharpest of students of economics and money theory.
I would hope you might join our Web of Debt Forum, where your insights would be appreciated:
http://www.forum.webofdebt.com
Jere
…the money supply has not been hyperinflated but, to the contrary, if anything is depressed and deflated. It NEEDS pumping up. I’m no fan of the Fed, but in this case I think they’re doing the right thing. Ellen
——————————————————-
——————————————————–
Well, I would say that the Fed is not doing the WRONG thing. It is certainly better than doing nothing, which was essentially their response to the 1929 crash.
The problem is that it is pushing on a string. Money is trickling down from the top, from Wall Street. It has limited effect.
Much more effective would be paying dividends directly to final consumers through dividends and retail discounts. This would increase the rate of profit, stimulating increasing production and consumption.
Sure, a national dividend would be good, but try getting that passed in Congress. Meanwhile, Bernanke is doing what he has to do, and I say we should cheer him on — not in bailing out the banks, which is a bad idea, but in buying longterm government bonds. The Chinese are now saying we should buy their patronage in YUAN. Great. We’re a lot better off selling our debt to our own central bank, which rebates the interest to the government, than selling it to the Chinese in their own currency, which they can manipulate and control. What do we need with Yuan? We need dollars, so let’s print some up, spend them into the economy on worthy projects, and get the wheels of production turning again.
Exactly, Ellen. I agree with you, and in this instance, Silas, that what the Fed, and the Obama administration is doing is far better than doing nothing. Too bad we can’t get the real solution: public control of the money supply. Greenbacks. Then we could even buy up the national debt once and for all, and put money where it belongs, in service to mankind, rather than “serving” as our master.
As to the contention the economy needs pumping up, I believe it is because the loans made on overpriced, irresponsible and fraudulent valued mortgages and monetary instruments are going sour resulting in insolvency of banks, mortgage, and financial firms.
It unfortunately carries over into the construction trades and non-corrupt firms.
The term monetizing the debt could be stretched to apply to the Fed’s injection of funds to prevent banks and financial firms on Wall Street from bankruptcy. (Congress approved the funds for other purposes but we saw who is in control and who is protected.)
Protecting firms from bankruptcy resulting from scandalous or criminal schemes for their private enrichment appears to be a poor use of money stolen from the citizens via inflation. Funds approved by Congress are not being used to assist the great unwashed masses.
Suggestions that future government spending would be more wisely handled is belied by history