mick silver
18th August 2010, 07:02 PM
http://www.321gold.com/editorials/cafaro/cafaro081810.html .... Paul J. Cafaro
Nuclear Physicist
Aug 18, 2010
"Quantitative easing" by the Fed, just forces more paper dollars into the financial system, supposedly to counteract deflation. This is just outright crazy, first of all, creating more paper money "does not create more wealth" and "does not create more savings" only "more fiat dollars." And fiat money after all is simply a "medium of exchange," paper does not have intrinsic worth of its own, more importantly when that paper "medium of exchange" is devalued "by increasing its supply" the devaluation effects "are not uniform," because some people get to use the extra paper money sooner then others before the prices of things change, so the price rises created by these extra dollars affect people unequally (because as the price of things begin to rise income could still be falling for some), these distortions lead to the destruction of real wealth for the people who don't get access to the new money right away.
In other words, not only does increasing the paper money supply fail to expand the economy but it eventually brings about a reduction in the overall size of the economy because by devaluing the medium of exchange (by increasing its supply) hurts savers or anyone on a fixed income or relative fixed salary who must use their previously saved dollars "that had more value" on goods that have been marked up because of the increased dollar supply, so the Fed's "quantitative easing" is not only misguided from a pragmatic economic perspective, it is ethically and morally wrong.
Perhaps it can better be explained by a simple example, say we have some people on an island 1) a diamond producer who hires workers on a fixed salary to mine the diamonds 2) a gold producer who hires workers on a fixed salary to mine the gold, and 3) some bankers who don't work at all (but just lay on the beach all day drinking mint julep's and spending money buying diamonds and gold for their bikini-clad girlfriends). Now you may be asking where do the bankers get all that money to buy that expensive diamond and gold jewelry for their girlfriends if they don't work to produce anything of tangible value? Easy, they just print it up at the central bank and then pass it out to all the bankers under the guise of some "TARP program" where the bankers tell the ordinary people they need this money because they are "too big to fail" at what they are doing and go to work for a living.
OK, now let's look at the implications of this economic scenario on this "imaginary island." Say only a fixed amount of paper dollars exists as a medium of exchange on the island (only "one million dollars" exists on the whole island), and say the producers of wealth (the diamond and gold companies) sell a one carat diamond for $1000 paper dollars and one ounce of gold for $1000 paper dollars. Also say the workers at the mines earn $100 dollars a week for their labor, so the workers can therefore buy a one carat diamond or a one ounce gold coin by saving all the money they earn over "a ten week" period. The bankers on the beach don't work to produce anything so when they need money they simply "print it up" out of thin air. Say the bankers decide they need to print up an "extra million dollars" for themselves to enjoy a better lifestyle... now there is a total of "two million dollars" on the island, the bankers live lavishly, buying many diamonds and gold jewelry items for their girlfriends with the extra money they printed. The producers of wealth (the diamond and gold companies) seeing "the paper medium of exchange" double overnight don't want to give their real diamond and gold wealth away for this extra counterfeit paper the bankers just printed up "out of thin air," so they begin to raise their prices to be more in line with the increased amount of "exchange paper" now circulating on the island. In order to get things in proper balance a one carat diamond will now have to sell for $2000 paper dollars and a one ounce gold coin $2000 dollars in the newly devalued "medium of exchange." The producers are not making more "real money" on what they buy and sell, a one carat diamond still buys a one ounce gold coin, only the "medium of exchange" being used has increased, so the prices of "real tangible things" remains the same; it just requires additional paper money to be traded because the bankers doubled the money supply, which inflates the prices of things but not their value. The corporations are effectively selling their products for the same price, however, they too "can make some extra money" if they are able to keep the workers salaries at $100 dollars per week.
The bankers don't care what price they have to pay for the diamonds and gold they purchase because they benefit by the fact that they can just print up whatever paper money they need out of thin air. Similarly the industrialists can get to benefit by the doubling of the island's paper money supply because they can raise prices while keeping their workers' salaries constant, so who gets hurt? You guessed it, the workers at the mines, the workers find they must now work and save all their money for "twenty weeks" to buy a one carat diamond or a one ounce gold coin. These workers are subjected to "a 100 percent increase in the cost" of the diamonds and gold they buy, this is "real inflation" to them, but the bankers and corporations conspire to say there is "no inflation." They "fix" the consumer price index to exclude diamonds and gold from their CPI calculations, in that way, the bankers (who control the island's government) and industrialists have an excuse not to pay the workers the proper amount of paper dollars for their labor, the workers don't get any COLA salary increase and retired workers don't get any Social Security increase. In this way, the banksters and big corporations defraud the working and retired workers, which is unethical and morally wrong.
When the workers begin to complain about "rising prices" the bankers tell them that they should instead fear "falling prices." They say "to have falling prices" is bad for the economy, this is pure banker deception, just look at the US economy from the mid 1870's through to the mid 1890's... the US economy "grew more" during this 20-year period "of falling prices" and relentless "price deflation" than it did during any 20-year period in US history. The fact is, people will step up and buy more if the price is cheap "boosting the economy," and they will hold off on purchases if the price is too high "contracting the economy." The bankers, by creating inflation and raising prices, are in effect "contracting the economy," they "fear falling prices" because it will actually result in boosting the economy and "helping the working man." Instead they "twist things" and create a falsehood, they "alarm the populace" by saying falling prices are a bad thing and thus, scaring the people about deflation, provide "justification" for them to print even more paper money "for themselves." This then leads to more inflation and even higher prices for the poor workers on fixed salaries and "contracts the economy" even more. See the picture, as the bankers squeeze and contract the economy by printing more paper money out-of-thin-air they are able to "squeeze wealth out of ordinary people" and keep it for themselves.
Fast forward... the Fed at its last meeting stated they are "less optimistic" about the US economy (well with all the trillions of new dollars they just created this is an obvious result), the common people don't have the money to purchase higher priced items as their pay raises were squashed and COLAs reduced to zero, but the greedy Fed bankers know exactly what they are doing, they have now abandoned any pretense of being ready to implement an "exit strategy" and not flood the economy with more paper money, instead the Fed stated it will buy sufficient new government debt securities to prevent the money supply from contracting, thus the bankers clearly have no intention to pull back from their ultra-easy monetary stance of the past two years... they are printing money hand-over-fist "out of thin air" to stuff their own pockets to the breaking point.
Workers should expect the next step in the banksters' plans to be the announcement by the Fed that "due to a further deterioration in the pace of economic recovery" it will be required that the bankers "expand the money supply even further" by ramping up the rate at which they purchase government debt securities. Expanding the money supply in this way is only going to "hurt workers" who will see no increase in their pay while the cost of the things they want to buy increases (contracting the economy). Retirees will really be out of luck, workers unions may squeeze out some minor pay adjustments for their still-working members but it's going to be very difficult for any union to achieve much headway because the corporations just keep moving the high paying jobs out of the country, the consequence of which has resulted in the US economy achieving "zero growth" in private-sector employment over the past 10 years. The Fed's sharp increases in the rate of money-supply growth will only "exasperate inflation for the working people and further contract the economy" while the bankers and corporations make out like bandits by opening the monetary floodgates.
With US economic data currently weak and likely to get weaker over the next few months as workers are not spending (either because they were fired or obtained no salary increase), it won't take much for the bankers to move to the next step in their plan "to create another deflation scare" in the very near future, in fact many articles are now appearing in the "banker controlled mainstream press" about "the supposed risks of deflation" (but deflation actually makes things cheaper for the working man and will revive the economy).
But the Fed is preparing to "trick us again" by their "deflation scare tactics." When they are ready, they will begin another surge in the rate of monetary inflation that only benefits them and the big corporations, and this will set the stage for the stock market's next intermediate-term advance toward a 14,000 Dow as corporations will be showing higher "nominal income gains" in inflated dollar terms, and gold will make its next multi-hundred-dollar price move just to stay even in "real tangible value" terms.
Cheerleader Sarah Palin (the bankers choice as head of the Tea Party) will probably say: "print-baby-print," to hell with the ordinary workers, what is good for the big corporations and good for the bankers is the only thing that is important, these people have no regrets sending all us workers over the "bridge to nowhere" in the same way "thieving pirates of old" made their captives "walk the plank."
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Nuclear Physicist
Aug 18, 2010
"Quantitative easing" by the Fed, just forces more paper dollars into the financial system, supposedly to counteract deflation. This is just outright crazy, first of all, creating more paper money "does not create more wealth" and "does not create more savings" only "more fiat dollars." And fiat money after all is simply a "medium of exchange," paper does not have intrinsic worth of its own, more importantly when that paper "medium of exchange" is devalued "by increasing its supply" the devaluation effects "are not uniform," because some people get to use the extra paper money sooner then others before the prices of things change, so the price rises created by these extra dollars affect people unequally (because as the price of things begin to rise income could still be falling for some), these distortions lead to the destruction of real wealth for the people who don't get access to the new money right away.
In other words, not only does increasing the paper money supply fail to expand the economy but it eventually brings about a reduction in the overall size of the economy because by devaluing the medium of exchange (by increasing its supply) hurts savers or anyone on a fixed income or relative fixed salary who must use their previously saved dollars "that had more value" on goods that have been marked up because of the increased dollar supply, so the Fed's "quantitative easing" is not only misguided from a pragmatic economic perspective, it is ethically and morally wrong.
Perhaps it can better be explained by a simple example, say we have some people on an island 1) a diamond producer who hires workers on a fixed salary to mine the diamonds 2) a gold producer who hires workers on a fixed salary to mine the gold, and 3) some bankers who don't work at all (but just lay on the beach all day drinking mint julep's and spending money buying diamonds and gold for their bikini-clad girlfriends). Now you may be asking where do the bankers get all that money to buy that expensive diamond and gold jewelry for their girlfriends if they don't work to produce anything of tangible value? Easy, they just print it up at the central bank and then pass it out to all the bankers under the guise of some "TARP program" where the bankers tell the ordinary people they need this money because they are "too big to fail" at what they are doing and go to work for a living.
OK, now let's look at the implications of this economic scenario on this "imaginary island." Say only a fixed amount of paper dollars exists as a medium of exchange on the island (only "one million dollars" exists on the whole island), and say the producers of wealth (the diamond and gold companies) sell a one carat diamond for $1000 paper dollars and one ounce of gold for $1000 paper dollars. Also say the workers at the mines earn $100 dollars a week for their labor, so the workers can therefore buy a one carat diamond or a one ounce gold coin by saving all the money they earn over "a ten week" period. The bankers on the beach don't work to produce anything so when they need money they simply "print it up" out of thin air. Say the bankers decide they need to print up an "extra million dollars" for themselves to enjoy a better lifestyle... now there is a total of "two million dollars" on the island, the bankers live lavishly, buying many diamonds and gold jewelry items for their girlfriends with the extra money they printed. The producers of wealth (the diamond and gold companies) seeing "the paper medium of exchange" double overnight don't want to give their real diamond and gold wealth away for this extra counterfeit paper the bankers just printed up "out of thin air," so they begin to raise their prices to be more in line with the increased amount of "exchange paper" now circulating on the island. In order to get things in proper balance a one carat diamond will now have to sell for $2000 paper dollars and a one ounce gold coin $2000 dollars in the newly devalued "medium of exchange." The producers are not making more "real money" on what they buy and sell, a one carat diamond still buys a one ounce gold coin, only the "medium of exchange" being used has increased, so the prices of "real tangible things" remains the same; it just requires additional paper money to be traded because the bankers doubled the money supply, which inflates the prices of things but not their value. The corporations are effectively selling their products for the same price, however, they too "can make some extra money" if they are able to keep the workers salaries at $100 dollars per week.
The bankers don't care what price they have to pay for the diamonds and gold they purchase because they benefit by the fact that they can just print up whatever paper money they need out of thin air. Similarly the industrialists can get to benefit by the doubling of the island's paper money supply because they can raise prices while keeping their workers' salaries constant, so who gets hurt? You guessed it, the workers at the mines, the workers find they must now work and save all their money for "twenty weeks" to buy a one carat diamond or a one ounce gold coin. These workers are subjected to "a 100 percent increase in the cost" of the diamonds and gold they buy, this is "real inflation" to them, but the bankers and corporations conspire to say there is "no inflation." They "fix" the consumer price index to exclude diamonds and gold from their CPI calculations, in that way, the bankers (who control the island's government) and industrialists have an excuse not to pay the workers the proper amount of paper dollars for their labor, the workers don't get any COLA salary increase and retired workers don't get any Social Security increase. In this way, the banksters and big corporations defraud the working and retired workers, which is unethical and morally wrong.
When the workers begin to complain about "rising prices" the bankers tell them that they should instead fear "falling prices." They say "to have falling prices" is bad for the economy, this is pure banker deception, just look at the US economy from the mid 1870's through to the mid 1890's... the US economy "grew more" during this 20-year period "of falling prices" and relentless "price deflation" than it did during any 20-year period in US history. The fact is, people will step up and buy more if the price is cheap "boosting the economy," and they will hold off on purchases if the price is too high "contracting the economy." The bankers, by creating inflation and raising prices, are in effect "contracting the economy," they "fear falling prices" because it will actually result in boosting the economy and "helping the working man." Instead they "twist things" and create a falsehood, they "alarm the populace" by saying falling prices are a bad thing and thus, scaring the people about deflation, provide "justification" for them to print even more paper money "for themselves." This then leads to more inflation and even higher prices for the poor workers on fixed salaries and "contracts the economy" even more. See the picture, as the bankers squeeze and contract the economy by printing more paper money out-of-thin-air they are able to "squeeze wealth out of ordinary people" and keep it for themselves.
Fast forward... the Fed at its last meeting stated they are "less optimistic" about the US economy (well with all the trillions of new dollars they just created this is an obvious result), the common people don't have the money to purchase higher priced items as their pay raises were squashed and COLAs reduced to zero, but the greedy Fed bankers know exactly what they are doing, they have now abandoned any pretense of being ready to implement an "exit strategy" and not flood the economy with more paper money, instead the Fed stated it will buy sufficient new government debt securities to prevent the money supply from contracting, thus the bankers clearly have no intention to pull back from their ultra-easy monetary stance of the past two years... they are printing money hand-over-fist "out of thin air" to stuff their own pockets to the breaking point.
Workers should expect the next step in the banksters' plans to be the announcement by the Fed that "due to a further deterioration in the pace of economic recovery" it will be required that the bankers "expand the money supply even further" by ramping up the rate at which they purchase government debt securities. Expanding the money supply in this way is only going to "hurt workers" who will see no increase in their pay while the cost of the things they want to buy increases (contracting the economy). Retirees will really be out of luck, workers unions may squeeze out some minor pay adjustments for their still-working members but it's going to be very difficult for any union to achieve much headway because the corporations just keep moving the high paying jobs out of the country, the consequence of which has resulted in the US economy achieving "zero growth" in private-sector employment over the past 10 years. The Fed's sharp increases in the rate of money-supply growth will only "exasperate inflation for the working people and further contract the economy" while the bankers and corporations make out like bandits by opening the monetary floodgates.
With US economic data currently weak and likely to get weaker over the next few months as workers are not spending (either because they were fired or obtained no salary increase), it won't take much for the bankers to move to the next step in their plan "to create another deflation scare" in the very near future, in fact many articles are now appearing in the "banker controlled mainstream press" about "the supposed risks of deflation" (but deflation actually makes things cheaper for the working man and will revive the economy).
But the Fed is preparing to "trick us again" by their "deflation scare tactics." When they are ready, they will begin another surge in the rate of monetary inflation that only benefits them and the big corporations, and this will set the stage for the stock market's next intermediate-term advance toward a 14,000 Dow as corporations will be showing higher "nominal income gains" in inflated dollar terms, and gold will make its next multi-hundred-dollar price move just to stay even in "real tangible value" terms.
Cheerleader Sarah Palin (the bankers choice as head of the Tea Party) will probably say: "print-baby-print," to hell with the ordinary workers, what is good for the big corporations and good for the bankers is the only thing that is important, these people have no regrets sending all us workers over the "bridge to nowhere" in the same way "thieving pirates of old" made their captives "walk the plank."
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