QUOTE OF THE DAY: Printing money is not sustainable [updated]

Morons like Bernard Hickey have been beating the drum for our Reserve Bank to do what every other Reserve Bank in the world has been doing: to cross their fingers and print money like there’s no tomorrow.

[Other governments’] print and hope strategies look set to leave anyone who doesn't print and hope sprawling in the dust [says Hickey]. 
The last one to print and devalue is the loser.

As I’ve said before, Bernard Hickey is a moron.  If anyone in authority listens to him, we will be the losers.

As if we should put our heads in the oven just because everyone else is! As if propping up share markets and bankers’ profits by faking reality is somehow a sound policy. As if  the printing of more coloured pieces of paper can somehow bring new resources into existence.  As if printing these new bits of paper doesn’t destroy your savings and devalue every existing piece of paper in your pocket. As if printing ever increasing tranches of this bailout crack (just another hit, please Doc!) isn’t like taking a tiger by the tail. As if the creation of new credit “out of the ether” is all it takes to create a sustainable boom…

“The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The boom comes to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market. But it could not last forever even if inflation and credit expansion were to go on endlessly. It would then encounter the barriers which prevent the boundless expansion of circulation credit. It would lead to the crack-up boom and the breakdown of the whole monetary system.”
            - Ludwig von Mises, “Interest, Credit Expansion & the Trade Cycle,” Chapter 20 of Human Action

[Hat tip Foundation for Economic Growth]

UPDATE: From Detlev Schlicter’s Paper Money Collapse blog:

    …the public believes it was greedy bankers and ‘unfettered capitalism’ that brought us down. But cheap credit through state fiat money and the systematic subsidization of the housing market are not features of the free market but of politics. The present mess is the result of decades of institutionalized monetary debasement and the accumulation of public debt. These policies have left us with bankrupt welfare states and overstretched banks, yet none of this has diminished the enthusiasm of politicians and bureaucrats to give us more of their medicine…
Prosperity through money printing?
    The persistent debasement of money in the modern state fiat money system is an obstacle to the smooth operation of the market, the production of wealth and the growth in prosperity. It keeps the middle class in bondage as its efforts to save and gain financial independence are constantly undermined by the official policy of inflationism.
   But the central planners and central bankers and their apologists among journalists and economists tell us that it is exactly the other way round: “Prosperity through monetary debasement” is Big Brother’s slogan, and he has spokespeople with outstanding academic credentials to explain this absurdity to the masses. In November 2010, MIT and Princeton man Ben Bernanke, the U.S. government’s money-printer-in-chief, wrote this in the Washington Post when explaining to the less educated why creating $600 billion out of thin air and messaging yields on government debt down was a clever policy:

Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

Well, that was 14 months ago. As it turns out, manipulating the economy by artificially lowering rates (lowering rates not by saving but by simply printing money) has not started a virtuous circle. Such manipulations come with nasty unintended consequences, and after a few decades of such a policy the accumulated unintended consequences far outweigh whatever short –lived growth blip money debasement may have manufactured otherwise. None of this has anything to do with healthy growth and a functioning free market economy.
    But it is important that those in positions of authority do not admit that they are clueless. They never make mistakes. Their policy is never wrong. They simply need to do more of the same – and then even more. As I write this, the Fed is, of course, preparing another round of quantitative easing, and so is the Bank of England. And the ‘economists’ on Wall Street and the City of London cheer them on.
    The debasement of paper money certainly continues.

And the morons (and those who get first use of the new printing) stand by and cheer.