Wednesday, September 22, 2010

In Case You're a Sound Sleeper

As a dedicated insomniac for the last decade I always have trouble sleeping.  But for those of you who have no trouble finding the Land of Nod, here are a few things to keep you awake tonight:

In a credit-driven monetary system, you can only get "inflation" (in the truest sense, where it flows through to wages and prices, thereby debasing - that is, helping - people pay down indebtedness) if there is credit expansion.

But when the limit of credit expansion is reached ...further machinations of this sort do nothing other than bankrupt the population.

We essentially have the Fed trying to create inflation in order to pump the economy and stabilize employment, but it isn't working because no one wants new credit.

So we have the government spending like mad, the Fed pushing ZIRP (Zero Interest Rate Policy) AND having bought all sorts of bonds (one type of paper) by issuing new money (a different kind of paper) through quantitative easing, and now hinting to do more.  And so far all of this has done...nothing, except rack up more debt that someone has to either repay or that has to be defaulted on.

1 comment:

The Arthurian said...

Hello, Director. It makes no sense to me, in this time of excessive indebtedness, that the Fed prints a new trillion to buy up "assets" with it, hoping the banks will then make even more loans with all that new money.

If they took that trillion and paid off some debt, we'd end up with less debt.

And the money would be destroyed too, by the process of paying back debt. So it wouldn't even be inflationary.

Good links.