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… They are just a way of swindling the public

… They are just a way of swindling the public

Bill Bonner Letter April 2016

Say’s law tells us that money doesn’t really matter. “You buy products with products” is the vernacular expression. If you want to buy something, you have to produce something that you can trade for it. The “money” just greases the transaction.

If you “in ate” the currency, you are asking for trouble. Not merely because the additions to the money supply imply a reduction in the value of currency outstanding (inflation). But also because the additions to the money supply do not represent genuine increases in wealth that can be exchanged for other wealth. They are just a way of swindling the public.”

For the naive mind there is something miraculous in the issuance of fiat money. A magic word spoken by the government creates out of nothing a thing which can be exchanged against any merchandise a man would like to get. How pale is the art of sorcerers, witches, and conjurors when compared with that of the government’s Treasury Department!

For the naive mind there is something miraculous in the issuance of fiat money. A magic word spoken by the government creates out of nothing a thing which can be exchanged against any merchandise a man would like to get. How pale is the art of sorcerers, witches, and conjurors when compared with that of the government’s Treasury Department!

–Ludwig von Mises

For the naive mind there is something miraculous in the issuance of fiat money. A magic word spoken by the government creates out of nothing a thing which can be exchanged against any merchandise a man would like to get. How pale is the art of sorcerers, witches, and conjurors when compared with that of the government’s Treasury Department!”

Effort and reward were cut off from one another. The working man still had to labor. But it was the banker, gambler, speculator, lender, financier, investor, politician, or inside operator who made the money …

Effort and reward were cut off from one another. The working man still had to labor. But it was the banker, gambler, speculator, lender, financier, investor, politician, or inside operator who made the money …

The Old Testament tells us that God chased Adam and Eve from the Garden of Eden with this curse: “By the sweat of your brow, you will earn your food until you return to the ground.”

From then on, you worked… you earned money… you could buy bread. Or lend it out. Or invest it.

Money is compensation… for work, for risk-taking, for accumulating knowledge and capital.
Money is information. It tells us how much reward we’ve earned… how much things cost… how much profit, how much loss, how much something is worth… how much we’ve saved or spent… how much we need… and how much we’ve got.

Money doesn’t have to be “hard” or “soft” or expensive or cheap. But it has to be honest. Otherwise, the whole system runs into a ditch.

But the new money was phony. It put the cart ahead of the horse. This was money that no one ever had to break a sweat to get. It was based on credit. It no longer represented wealth; it now represented anti-wealth, debt. And so, the economy – which worked for money – stopped producing real wealth.

The Fed could create this strange new money at will. It was no longer the real thing but a counterfeit. In this way, effort and reward were cut off from one another. The working man still had to labor. But it was the banker, gambler, speculator, lender, nancier, investor, politician, or inside operator who made the money.

And the nature of the economy changed. Instead of rewarding the productive Main Street economy, it rewarded insiders… and the financial sector. The penthouses of Manhattan and the summer houses of the Hamptons changed owners. Gone were the scions of Detroit factories and the titans of New York commerce. Gone were the people who had actually added to the wealth of the nation.

In their place were the Wall Street hustlers… the people who moved money around… taking it from the people who made it and giving it to the financial industry, the money lenders, the insiders, and the Deep State.

This process is misunderstood. It is thought that Wall Street greed and deregulation caused the shift. But Wall Street was just as greedy as it always was… and financial regulations actually increased dramatically throughout the entire period.

It was not human nature that had changed; it was the money. And it gradually changed everything. Debt increased. But it was not normal debt. Just as the money was new, so was the debt. It was a funny kind of “elastic” debt that could stretch almost infinitely… but could snap back quickly, too.”

The Bill Bonner Letter February 2016