The other night, I was discussing the Fed’s destructive madness with my wife, when my nine-year-old daughter, Sasha, asked why I was so concerned. I asked her this question: “As the government prints more and more money, what will happen to the value of that money?”
Sasha thought for a second and then said, “It would go down.” She then added, “If they print a bunch of $50 bills, they probably would be worth about $5 and if they print $100 bills, they will become worth $10.”
Now, folks, if a little girl who has not been much exposed to economic analysis can quickly come up with the right conclusion, then why can’t a Fed chairman and members of the Obama administration do the same? Of course, the answer is that they do understand, but they have a nice backup strategy when the hammer comes down.
They simply will blame the free market, Paul Krugman and the New York Times will demand price and capital controls, and we will see federal prosecutors go after people why try to get out of the dollar. And it will work, as the public will buy their lies. But at least Krugman and Obama could not fool my nine-year-old daughter.
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My little girl put it together, too! We did an experiment with Monopoly. Common sense and a dose of reality are precisely what can’t be tolerated among policy-makers.
As kids we did that experiment with Monopoly over 50 years ago. Somehow the Monopoly currency was thrown out so we made our own out of cardboard cards. We figured if we made much more of it we could speed up the game.
During the buying phase when prices were fixed to the board prices, all players had enough money to buy whatever they landed on so the benefit was realised. Then in the trading phase before houses and hotels were erected, the price of property exploded. We realised as subteens through this game what expansion of the money supply meant. The good thing was we didn’t hurt anyone. Not like these goons today who can destroy whole economies and with them people’s lives.
Meanwhile, the Obama administration is considering ways to seize firms (other than banks) whose collapse would threaten the economy:
http://www.msnbc.msn.com/id/29847658
Of course, since the inflation of the money supply will affect the price of goods differently (Given that the amount added to the money supply is not spent on all goods and services evenly), the feds can claim that the inflation of the money supply is not related to the rise in prices of goods and services. Hopefully Mr. Anderson, your daughter would know this little fact each time somebody would ask why we had a low increase in the so-called price level during the 1990s (Hint: which markets registered a huge rise in prices?). Assuming she knows that inflation is being used incorrectly these days.
It seems that the proper question is “why does the American public always fall for the ‘capitalism failed’ bollocks?
It baffles me.
William wrote:
Of course, the answer is that they do understand, but they have a nice backup strategy when the hammer comes down.
William,
Actually they do not understand. They have educated themselves out of common sense. Their equations over-rule the obvious and their theories supercede reality. Both their equations and theories cannot be proven wrong because both are dependent on volumn rather than logic. You have heard it before but here it is again. “Sure I lose money on each sale but I make it up on volumn.”
I think that they do understandwhat they are doing, but this is the system that they have grown up with, learned to profit from and that allows for what they believe to be unconstrained growth. Even if the current system is eventually destructive, they will try to keep it going at all costs because other, saner alternatives seem too unrealistic for the “common man” to bear. The current monetary system propagates quick, easy, and painless growth. Since people don’t have to put off consumption and can immediately fulfill their desires, the system seems preferable to the difficult alternative of saving for future consumption and building wealth with hard work and diligence. The system is unraveling before their eyes and they are pulling out all of the stops to try to “fix” it. The ironic thing is that they are trying to “repair” something back to a broken state while the system is trying to heal itself.
Should 9 year old girl run the Fed? I would say yes because it is unlikely she would do near the amount of damage the current adults in charge are doing.
I can’t figure out whether these guys (Obama, et al.) understand or not. If they do understand, they’re bad bad people. But I can’t quite discount the possibility that they are blinded by their upbringing. Since most of us have spent our entire lives under this absurd monetary system, is it possible for smart people to have this much trouble seeing the forest instead of just trees?
My vote is for: Yes, they understand, and yes, they are just that evil.
The Fed, the bankers, and the government officials all understand very well what they are doing. You should not take their cover lies seriously because they don’t take them seriously.
What is stupefying is that the public goes along with the charade. Any nine year old can see the emperor has no clothes. We can see and say it too. But why do the people whose pensions, retirement, and wealth are being frittered away choose to ignore the theft?
I have argued with so many people about what is happening and my conclusion is that the vast majority of people simply have blind faith that they live in the land of the free and the government is here to help and defend them. People know that bad things are happening, but they attribute them to whatever bogey man appeals to them without introspectively considering that they are being lied to and taken advantage of by the very leaders they depend upon for safety.
In other words, I have concluded that people are asking for trouble and getting what they deserve. I only wish I didn’t have to suffer for their sins. Unlimited right of secession would be a good thing.
I think they’ve been baffled by their own BS. I don’t think they are inherently evil.
Look at it this way. A very few evil people created the Federal Reserve Banking system. Then they convinced a few more somewhat decent but greedy people in DC to pass the Federal Reserve act. Those questionable folks, got a few more of their “friends” to go along with it. Every thing else that follows after that is really regular Joes not knowing the difference between the baffling BS and the truth.
Roll the clock forward 96 years and you have Joes all over the place who don’t know, and don’t want to know because if anybody like Krugman tries to explain it to them their eyes glaze over. They just want to do the job.
But now the job, the position they hold when they take office, either by hire or election, is a position that carries with it the functioning of the original evil.
They don’t know that when they sit in that seat, that they become a tool of evil. They don’t know, and they are baffled at their own inability to do the good things they set out to do.
This is the nature of bureaucracy. The framework of the system may change it’s individual parts, the people who hold the office, but the inherent difficulties of the seat are the problem. Making changes of personel, will not change the nature of the system itself.
It’s not the people that are evil, it’s their JOB that is evil, and the context within which they have to do it.
Limited Government isn’t just good for the people at large, it’s better for the people who do the job. The smaller and more constrained the position, the less evil it carries with it’s seat.
Then again neither Sasha nor any of her girlish cronies are up for reelection!
The Democrats/Republicans would rather destroy our economy than lose a single seat in Congress, and to my mind that has been what this perpetual abuse of Keynesian economics has been all about.
Read “Fiat Money Inflation in France”. It is on the site around here somewhere for a good price.
In the book, it says something along the lines of “even the most skilled statesmen” fell victim to the temptation of inflating fiat money.
Too bad we don’t have skilled statesmen these days. We have the likes of Nancy Pelosi, Ben Bernanke and Tim Geitner running the show and I think we might just be in for a world of hurt before this is all said and done.
I’m running for president when I turn 35, so I hope some of you guys are around in the 2020′s because I’ll be appointing people with real monetary understanding to my cabinet.
My daughters are 17 and 14, and they not only understand the claim that issuing money causes price inflation, they also understand why it is wrong. They understand the real bills doctrine, which says that the value of money is equal to the value of the assets backing that money. So, for example, if the Fed issues 10% more money, while the Fed’s bondholdings also rise by 10%, the value of the dollar will be unaffected.
Mike,
But isn’t that only true if the 10% of new money is withdrawn from circulation once the 10% increase in bond holdings is repaid and not rolled over? And that’s before the multiplying impact of FRB.
Money and Ethics
Tuesday, March 24, 2009
Auditing The Federal Reserve Is The Ethical Thing To Do!
Ron Paul is a man of peace. He knows that if the dollar collapses this country will lose its peaceful way of life because the political class created by Keynesianism will continue to try to extract wealth from the victim class but there will be serious resistence and discontent.
We can do our part as peace-loving individuals by helping to get H.R. 1207 and its offspring in the Senate passed.
This is the best way to take the battle directly at the unConstitutional coup since it will be mustering all its resources to keep its counterfeiting operation secret and unrestrained.
JB:
“But isn’t that only true if the 10% of new money is withdrawn from circulation once the 10% increase in bond holdings is repaid and not rolled over? And that’s before the multiplying impact of FRB.”
That’s certainly what the quantity theory of money implies, but the real bills doctrine says that if a bank has issued 100 paper currency units, while holding various assets worth 100 ounces of silver, then each currency unit will be worth 1 ounce. If the bank then issues another 200 currency units, in exchange for additional assets worth 200 ounces, then each currency unit will still be worth 1 ounce. If fractional reserve banks issue 1000 of their own currency units, backed by assets worth 1000 ounces, then each of those currency units will be worth 1 ounce, and the original currency units will be unaffected.
The Greeks knew the world was flat, when anybody looking over the horizon could prove them wrong. It’s far too easy to dismiss the obvious because of the lack of rigor involved. So they probably do believe what they’re spouting.
In 1982, after the price of oil had gone down and revenues shrank, the then president of Mexico, José Luis López Portillo, said in national TV that “I will defend the Peso like a dog!”, after devaluing the Peso to its lower level up to then. He also blamed the bankers, nationalized the banks (expropriated them, actually), and converted all savings in US Dollars into Pesos, destroying the nest eggs of hundreds of thousands of Mexicans.
Yes, the likes of Il Duce [Obama] know EXACTLY who the culprit is, but like Bill said: They always have a fall back strategy. In the case of the Mexican president, it was to blame greedy bankers. Il Duce simply blames greed itself, i.e. the free, unfettered market.
Maybe Il Duce will appear one of these days on TV, saying “I will defend the Dollar like a dog!” or words to that effect. When THAT happens, you will then know for sure that the US has gone Third World.
Sound money and fiat money are not abstract terms/ideas and they are not very complicated. With a little effort they can be taught to someone in probably thirty minutes or less. Maybe even less than that. For this reason I side with those that argue that these people DO KNOW EXACTLY what they are doing. They just don’t care. The reason they don’t care is because they are under the impression that they will get away with it. And everything so far is indicating that most of them will get away with it. What a shame. America robbed blind in broad daylight.
Duncan,
As kids nearly 50 years ago we learned the lesson of inflation through Monopoly as well.
To speed up the game, we increased the amount of money each player was given at the start of the game. While price controls (the game rules) were in place, properties were gobbled up rapidly.
When all the property was sold, the trading began which was uninhibited by the face value of the properties. We quickly found that the higher the amount of money available in the game overall, the higher the prices for property became in this trading period. At age 10 we knew that printing money (we actually printed more monopoly money on cardboard cards- the paper stuff was too flimsy lol) caused inflation.
These guys are doing the same thing now but unfortunately it’s not a game.
Your daughter is homeschooled, right?
Actually, my own 11 year old (yes, he’s homeschooled, but I don’t think that matters) explained to me why gas was more expensive on some days than on others. On the days it was expensive, everyone wanted it. On the days it wasn’t, no one wanted it. Well, there is a little more to the price of gas than that, but it’s a good start.
I do think there are some in the administration who know excactly what they are doing, but a lot of others have been surrounded by this nonsense for so long they honestly think they are doing the right thing. After all, we all grew up believing Hoover was a capitalist who loved the free market and that was why the Great Depression really got going. I was fortunate enough to learn that FDR did not get us out of the Depression–WWII did, but I live in a fairly fiscally conservative town. I do get the impression most people didn’t learn that one.
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