Central Bank Snake Oil Persists …

 TrumpCentral banks keep trying stimulus strategies that don’t work. Of course variations on government spending of money extracted from the economy cannot stimulate said economy. Government creates no wealth; it is the ultimate consumer of wealth. Government cannot stimulate an economy, only drag upon it. The failed Progressive economic policies tried first by Herbert Hoover and then Franklin Roosevelt during the Great Depression were derided then as an attempt to “spend ourselves rich.” That didn’t work then and is not working now. As we never tire of pointing out, you cannot save a patient with a blood transfusion if you must first drain the blood he needs from him.

Imagine that you and I share a tropical island. Your half of the island provides coconuts; my half has a lagoon full of fish. I need your coconuts; you need my fish. Say we have agreed to use U.S. dollars we happen to have as a trade medium. We are the market; we agree that one dollar will buy one fish or one coconut. We each have $10.

Your $10 will buy all of my fish on a given day; my $10 will buy all of your coconuts that same day. All is in balance. Suddenly, the Federal Reserve drops another $10 onto each of us from a helicopter. What resuts?

For me, I still have the same number of fish but twice as much money. The same is true of you and your coconuts. Our island’s wealth is unchanged but the island money has doubled. So, the money has lost half of its purchasing power, since there is no more to purchase than before. More dollars are chasing the same amounts of goods, as an economist (if honest) would put it.

Politicians want us t0 feel wealthier because we hold more dollars. $15 per hour of them, even. Never mind that what is available to buy has not increased, leaving the added dollars devalued. That is the swindle we accept from our politicians without troubling ourselves to notice.

We vote for say, Hillary Clinton because she demands $15 per hour as a minimum wage, never mind that the masses of low wage immigrants that she also demands will prevent wage increases.

Donald Trump started out with deporting illegal aliens in favor of employing citizens; he is now engaged in waffling that position down to deporting criminal aliens, leaving the mass of them to compete with citizens, keeping wages low. Yeah …

Government uses political, not economic, goals. It cannot “stimulate” any economy, but if politicians were to admit that, their opponents would be elected. So, they lie. And spend, and borrow from our future to fund that spending since they have not the funds now.

When enough people awaken to the fact that the resulting debt has grown so large that our kids and grandkids can’t repay it, the debt will be seen as worthless and its holders, banks, mutual funds, the Federal Reserve, the Treasury, will suddenly lose a large chunk of their perceived assets. That will wipe out banks and mutual funds and devalue the currency used by the treasury and the Federal Reserve.

Any of your money in said banks and mutual funds and government bonds will stop being valuable assets protecting your future and suddenly be worthless, with nothing that you will be able to do about it.

And if you remain around for long and the government repeats 2008 by bailing out said banks and such with taxpayer money, whatever you may have saved from the swindle will be devalued by that much.

Such is our simplified but we believe, fair take on our current reality. Feel free to argue; we are hardly economists here. We hold ourselves more respectable than that …

About Jack Curtis

Suspicious of government, doubtful of economics, fond of figure skating (but the off-ice part, not so much) Couple of degrees in government, a few medals in figure skating; just reading and suspicion for economics ...
This entry was posted in Ecomomics, Goverrnment, Politics, Uncategorized and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s