The Fed can create money but if it doesn't end up as household income it is "dead money."
In the consensus view, the Federal Reserve's unlimited quantitative easing (QE3) programs will do two things: 1) boost stocks and other "risk on" assets and 2) generate inflation. The two follow-on effects are related, of course; gold and other hard assets are rising in anticipation of higher inflation.
But all is not quite as it seems when it comes to the inflationary effect of creating money. I'm going to cover a lot of ground here so buckle up and grab your favorite stimulating beverage.
Let's use some examples to illustrate key features of the relationship between money creation and inflation. Let's say a central bank prints $1 trillion in cash currency, digs a big hole and buries it. Does that $1 trillion in new money cause inflation? No, because it never got into the hands of people who might trade it for goods and services in the real world.
Recall that the premise of monetary inflation is straightforward supply and demand: when money is abundant and goods are scarce, the price of goods rises as abundant demand (everybody has lots of cash or credit) meets limited supply (limited oil, gold, grain, etc.) in an open marketplace.
Let's say the Fed electronically creates $1 trillion and metaphorically buries it in some account where it sits as "dead money." It cannot trigger inflation because it isn't reaching the hands of people who might use it to buy scarce goods and services.
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So, when are you going to release that money that you printed and put in a box, and who is going to be informed the minute before it's released so they can reap it all into their pockets, thereby making my house value smaller because I didn't get the memo?
ReplyDeleteRight, I won't be able to attend that day, and neither will anyone else except for the few elite.
Complete B.S.!
yes it is complete bs. this is why the price of oil has shot up to $100 a barrel. Takes that many dollars to equal what $60 used to bring for the same barrel!
ReplyDeletekeep drinking the kool-aid!
We all know what is happening here. It is right in front of our eyes. We will not react however and the elite know it. There is only one proper reaction and that is for the masses to rise up and rid ourselves of these international bankers.
ReplyDeleteThat, we will never do. Why? Because they have mind controlled us into passive acceptance of their rule over us. The Bankers are qualitatively better people than us. They are more valuable, because their spirits are inhabited by powerful entities.