My first thought, strangely enough, laying in bed this morning was of the eye on the pyramid on the back of the $1 bill. The pyramid felt like a pile of gold, with an ever vigilant eye on it, protecting it. Researching the matter, I found this link, which puts the creation of the symbols at our founding–symbols which indicate belief in divine providence.
Then I thought about the rough edges on quarters and dimes. At one time, this prevented people from sanding off the edges from silver and gold coins ,and in effect stealing silver and gold. Our coins have not been made from precious metals for many decades, yet they continue the practice. Why? Appearances.
Which brings me to the big topic, the so-called “monetization of our debt”. Well, Paul Krugman, you’re getting the money in our economy you wanted. Happy?
As I argue constantly, you can’t have inflation without somebody getting something for nothing. This point is ineluctable. For this reason, I have also argued that inflation is intrinsically wealth transfer. Take a given Point A. Add inflation, and you find new people owning things they didn’t before. This process is subtle, though, so most people miss it.
I would encourage my reader (or readers, if I have more than one) to watch the movie “Life and Debt”. One of the things that is striking is that the IMF apparently has always pursued a policy of forcing nations to devalue their currenty, supposedly to “boost exports”. Well, think this through. What have you done when you converted a situation in which, say, one Chinese “Mao” (as I call the Chinese currency) is worth one American dollar, and made it so one Mao buys two American dollars? Or two American dollars worth of stuff?
The number of Mao’s, relatively speaking, stays the same (absent inflation on their side, too). This means that they can now buy not just our imports–supposedly the point–BUT OUR NATION. They can buy real estate cheaper, here. They can buy companies cheaper, here. They can buy sports teams, rent supermodels, spend a fortune in Vegas, and so on.
Here is what I have come to view as a fundamental truth: all nations need to be largely economically self sufficient. Take Jamaica: in that movie, they go through in detail how the much more efficient American corporations simply took over the Jamaican markets, making them fully dependent on imports. The goal was exports, not imports. The converse of the desired outcome was achieved. And of course many American businesses located in Jamaica. Tourists were drawn, but if you think about it, that too is a type of export, in which money from other nations flows to you.
We are going the Jamaica route, although of course the effects will be much more muted by our already existing very robust economic infrastructure. We can weather the storm, but that is the direction we’re going.
Who will be buying us up? Well, where is the money going? To Wall Street. The banks that compose the Fed have just decided it would be just PEACHY if the man at the head of the table would make a phone call and have a check ready for them at the front desk so that they can dump their Treasury Bond holdings. How much? Well, just leave the amount blank, and we’ll just go ahead and fill it in. Good? Great, thanks.
To be clear, in a free market (hopefully, of course: they may have used the Fed to buy the bonds in the first place) they purchased securities that paid a yield, say 1/2 of 1% over three years. If you buy it for $100, this means it pays back, assuming that yield is annual, $101.50. This isn’t much, but it is better than letting the money sit dormant, in a bad economy.
But what just happened? The Republicans won. Most rational observers believe (I am the essence of rationality: just ask me) that the FACT that many private companies are sitting on piles of cash that would normally be invested in growth is a function of fear. It’s unclear what effect Obamacare will have, but it’s a reasonable bet it will be much more than anticipated, both in bureaucratic headaches, and out of pocket costs. Cap and Trade has been in play, as are tax increases, which are inevitable at some point. To all this, our President appears to be an ardent leftist, as as such congenitally anti-business and pro-stranglehold on all but the companies that keep him in power (like GE–oh, isn’t it interesting that the GE CEO sits on the Federal Reserve Board of New York)
In any event, our economy is now poised for business expansion and job growth. Would this not be a handy time to transition from securites you bought because the economy was in the crapper to cash, that you can then use to buy control of yet more companies? Yes, of course. But what about inflation? What inflation? If you touch the dollar first, it still has its buying power.
The best possible spin on this is that in the process of transferring yet more of our national wealth to Wall Street, actual growth is funded: we make more stuff, more people get paid to make it, more stuff gets bought, etc.
Yet, this money can be used for anything. It can be used to organize anti-Republican activists. It can be used to fund labor unions. It could go overseas to buy up China or India, or Africa. It will go wherever the people getting it want it to go, and we the American people will have ZERO control over that. If people are simply greedy, which is normally a safe assumption, it will get invested wherever the best returns look to be. If they have a political agenda–and how could they not want to protect their cartel?–then some of that money will flow to preventing a close look at the Fed, in whatever way seems practical.
Globalists have long wanted a global currency. Undermining our currency–the de facto global currency–is a necessary precondition to achieving that goal. As things stand at the moment, I don’t think ANY proposals to put in place such a thing will get through a Republican Congress.
Yet, we have seen over the last half century or more how effective well run propaganda campaigns can be at changing the minds of stupid people, which candidly is a very high percentage of them. We still hear the name of Keynes with something other than contempt. This should tell us all we need about the power of defective thinking combined with apparent enthusiasm, coming from the mouths of people who are trusted “experts”.
That should do for now.