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The Ludwig von Mises Institute
Tu Ne Cede Malis
Advancing the Scholarship of Liberty in the Tradition of the Austrian School
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I can hear the voice of the shrunken head from the third Harry Potter movie:
“It’s gonna be a bumpy ride!”
Though I hope I am wrong, I anticipate the result of all these liquidity injections by the various central banks of the world to produce a great inflation that will potentially exceed that of the 1970s. Times are tough now, but they will likely only get worse from the creation of all this new money. Perhaps then the teachings of Hayek and von Mises will finally be heeded. We can hope at least.
I take some solace in knowing that my student loan debts will be much less than what they are now.
Did someone say Zimbabwe?
So, from 2004 to 2008, our monetary base increased 100 Billion (13%). In 2008 alone, the amount of money out there has increased 100 Billion so far (12%). Yet, last week, didnt Bernanke tell Congressman Paul that these policies and the bailout would not cause inflation? Since the definition of inflation is a “fall in the purchasing power” of a monetary unit (dollar)… I’d say that this is pretty definitive that inflation has happened and will happen drastically. With a greater supply of the dollar (and, even, a decreasing demand), that means that the value of it (or purchasing power) falls.
Don’t blame me, I didn’t vote for Bernanke.
Could the Mises Institute extend this graph back to the year 2000? The data from 2000 through 2003 should illustrate just how loose Fed monetary policy was during that crucial period.
Monetary base from 1999:
http://www.doomsdayproject.org/monetary-base.jpg
Could someone overlay the price of gold onto this chart?
Or, the chart that Joe has a link too?
I’ve had that graph taped to my door since last week, I’m thinking of having it silkscreened onto a painter’s smock as my Halloween costume this year.
The best part of the past 2 weeks has been my econ prof telling me that “these rumors who hear from people…that the dollar is on some kind of debt standard, are totally false. everyone knows we’re on a productivity standard.”
So apparently that 2 week spike off the page was when Red Bull was poured into the nation’s water supply? LOL
At this point, I am convinced most apologists are lying, no one can be that stupid.
Read this short press release from the Treasury dept:
September 17, 2008
HP-1144
Treasury Announces Supplementary Financing Program
Washington- The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, including enhancing its liquidity facilities this week. To manage the balance sheet impact of these efforts, the Federal Reserve has taken a number of actions, including redeeming and selling securities from the System Open Market Account portfolio.
The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve. The program will consist of a series of Treasury bills, apart from Treasury’s current borrowing program, which will provide cash for use in the Federal Reserve initiatives.
Announcements of and participation in auctions conducted under the Supplementary Financing Program will be governed by existing Treasury auction rules. Treasury will provide as much advance notification as possible regarding the timing, size, and maturity of any bills auctioned for Supplementary Financing Program purposes.”
This means that the Fed will now be purchasing directly new debt from the Treasury.
This is a big no-no for most central banks and treasuries as it signifies that the central bank is now the buyer of last resort for gov’t debt.
It confers “banana republic” status on the country.
The effects are many times more inflationary, dollar for dollar, than purchasing existing bonds from investment banks.(because the in the usual method,
government borrowing of 100 dollars only requires adding 10 to the monetary base.Now, some government borrowing will mean the equal dollar amount being added to the monetary base.)
This is as inflationary as the obsolete print and spend method.
As far as I know this is not even legal.
We are on the brink of hyperinflation-possibly.
The last piece of the puzzle is a change in demand for cash holdings, currently large and growing.
If this should reverse, buy a wheelbarrow.
This comment is as per Rothbards explanation in Mystery of Banking.I also recently read an article by Tom Szabo over at Silveraxis which I recommend highly, his take is a bit different than Rothbards but still very good.
silveraxis.com/todayinsilver/2008/10/04/the-fed-is-bankrupt-update-on-the-helicopter/
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