The Unintended Consequences of Money Printing

Discussion in 'Economics' started by Dharmakaya, Mar 18, 2012.


    "First of all, I do not believe that the central banks around the world will ever, and I repeat ever, reduce their balance sheets. They’ve gone the path of money printing and once you choose that path you’re in it, and you have to print more money.
    If you start to print, it has the biggest impact. Then you print more - it has a lesser impact unless you increase the rate of money printing very significantly. And, the third money printing has even less impact. And the problem is like the Fed: they printed money because they wanted to lift the housing market, but the housing market is the only asset that didn’t go up substantially."

    What do you think about this? Will they print faster and faster?
  2. zdreg


    they are hiring treasury officials from Zimbabwe.
  3. Humpy


    Benny & co are in a complete "fools paradise".

    Debasing the couinage/money value has never worked. It's just the quick fix that doesn't work.

    Osbourne in the UK is talking about selling 100 year Treasuries. Much the same I regret to say.

    It takes a bit of courage and lots of agro to fix the problem, but it can be done.

    Why should Clinton, Greenspan, Blai, Brown & co worry.? They have fat pensions and only a few more years left. No sorry - " we got it wrong" !
    It is Joe Public who is going to suffer the consequences - not the rich !

    Very unfair but that's capitalism.
  4. Humpy


  5. samus


    The essence of the problem is monetizing debt which is more of bona fide counterfeiting than it is to being a valid government policy. Monetizing debt is an immediate regressive tax.

    Let's say Congress needs a billion dollars. They issue US savings bonds which are purchased by you, me, China, Japan and anyone else who wants to buy them. When we buy these bonds, we are loaning the government real money from wealth that we have on hand. This is called real borrowing. Let's say that after we all have as many bonds as we want, there is a half billion dollars that has not yet been purchased. The Federal Reserve steps in and agrees to purchase the $500,000,000. The Fed does not have the money. Rather, they simply make an entry in a ledger (Congress' checking account) thereby creating the money out of thin air. As an additional insult, they then declare the bonds they have purchased as additional reserves and can now lend not only the original half billion, but because of the reserve ratio, they can lend an extra $4.5 billion to banks and others.

    This works as long as all debts are repaid. However, in a financial crisis such as the sub-prime mortgage crisis, debts are not repaid. The system spirals in on itself and crashes, unless the government prints more money to try to cover the crisis. During this time, your wealth is stolen. At some point in time, the government must account for creating money that did not exist. It will catch up to them just as it did to Bernie Madoff and all the other central banks that have failed in the past. It is the taxpayer who eventually pays the tab either through taxes or inflation.

    When monetizing debt the government doesn't just print the money and steal from the citizens. That would be too transparent. Rather they "print it" through trickery. The trickery is to have the central bank, our Federal Reserve create it as a loan to the government. Now we not only have to pay back money that does not exist, we also have to pay interest on it. We are paying interest on money that is stolen from us in the first place. (

    Everybody thinks we're fat dumb and happy right now, the markets rising, the economy is recovering (yeah, right), etc... but we're just planting seeds for a freaking disaster. It may take a few years to play out, or not.. but either way, it's going to come back and bite us in the ass. History proves this out.. ie Germany in the 20s..
  6. pupu


    It only needs to work until the next election and even when it blows up most people won't understand what happened
  7. samus


    Your absolutely right. The money we earn or save will simply be devalued by this inflation. It eats away bit by bit, and most of the electorate won't really notice it happening before the shit hits the fan. It's the greatest scam on earth.
  8. Money printing and debt monetization are normal operations of central banks and pose no problems if productivity is high and absorbs inflationary pressures. Most money issued via QE are sitting as deposits in CBs and only used to recapitalize banks. No problem for inflations. None whatsoever.
  9. Eight


    High productivity squeezes workers out of jobs nowadays. It didn't up until the late 60's but after that, forget it, jobless recoveries are the normal thing. We can't have a real recovery until the housing market gets underway because that is where a lot of the currently unemployed get their paychecks. Housing can't recover until we shake out the unresolved private and public debt.

    Yeah, the banks are sitting on all the newly printed money but when they start lending it out is when the money supply expansion becomes a reality, inflation will start up, the Fed will raise rates to combat it and that will put the finish to the housing market [again]..
  10. Yeah but it will not take that long because they will have to use the money to pay withdrawals or repayments on the debt which exists.
    #10     Mar 18, 2012