Thursday, September 01, 2011

QE3: Hard to stop. Wrong to start.

_BenYou might have noticed US Federal Reserve Chairman Ben Bernanke clearing his throat recently ready for the release of another monetary tsunami—a flood of counterfeit capital created out of thin air that will create no real resources, create no real savings, but which will stimulate a falling economy the falling stock market.

It’s just a matter of time. They will call it Quantitative Easing 3. We might call it the ‘Bernanke Put’—an expression of his on-going commitment to protect bankers and share traders from making losses.

Isn’t that nice of Mr Bernanke?

But have you noticed how more rapidly these injections of several trillion-weight of counterfeit capital have been coming?

No surprise, really, because once you’ve let the genie of monetary inflationary out of the bottle, every new injection of the genie’s monetary narcotic needs to keep coming faster and faster. Just like a real narcotic, really.

Every period of monetary inflation has been the same. (For a good account of one such period, the inflationary period that helped to bring on the French Revolution, check out the short book Fiat Money Inflation in France. And for the explanation of why accelerating monetary inflation is necessary once started, despite the dismal prognosis from its repeated application, read Hayek’s short book Tiger by the Tail.)

The present monetary system—a system of fiat money based on the organisation of debt into currency—is collapsing in both Europe and the US. No wonder even mainstream magazines like Forbes are starting to talk about the gold standard—the system maimed by Franklin Roosevelt, brutalised by John Maynard Keynes, and finally taken out the back and shot by ichard Nixon. The writers at Forbes don’t understand the system perfectly, but the system of monetary stability that underpinned the prosperity nineteenth is starting to be talked about again respectfully.

Perhaps in the long term that’s something we will thank Ben’s blundering for.

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2 Comments:

Anonymous Mort said...

I'm picking there will be a bit more volatility first so the impetus is truly demanded, and then the white knights of market freedom's destruction can come riding in, cash sacks a blazing, bombarding merchant banks with pallet-loads of freshly minted notes... his bosses will be pleased, not so much the poor schmuck taxpayer, or the subsistence merchant/farmer in developing nations

inflation heading your way in a hurry
it really is turning out the way Kiyosaki predicted 10 years ago, debt is money, cash is king if your cash is in an inflation proof form (gold, silver, platinum), and the boomers retirement savings are a free for all, you just have to manipulate the market enough to extract the wealth from the plans, then cause inflation to allow the govt to steal the rest

9/01/2011 12:18:00 pm  
Blogger Tribeless said...

Just love that Bernanke picture.

9/01/2011 01:57:00 pm  

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