Guest Post: How The Destruction Of The Dollar Threatens The Global Economy

Tyler Durden's picture

The following book excerpt is adapted from Chapter One of Money: How The Destruction of the Dollar Threatens The Global Economy – and What We Can Do About It, by Steve Forbes and Elizabeth Ames

The failure to understand money is shared by all nations and transcends politics and parties. The destructive monetary expansion undertaken during the Democratic administration of Barack Obama by then Federal Reserve chairman Ben Bernanke began in a Republican administration under Bernanke’s predecessor, Alan Greenspan. Republican Richard Nixon’s historic ending of the gold standard was a response to forces set in motion by the weak dollar policy of Democrat Lyndon Johnson.

For more than 40 years, one policy mistake has followed the next.  Each one has made things worse. The most glaring recent example is the early 2000s, when the Fed’s loose money policies led to the momentous worldwide panic and global recession that began in 2008. The remedy for that disaster? Quantitative easing—the large monetary expansion in history.

One of the reasons that QE has been such a failure was a distortionary bond-buying strategy that was part of QE known as “Operation Twist.” The Fed traditionally expands the monetary base by buying short-term Treasuries from financial institutions.  Banks then turn around and make short-term loans to those businesses that are the economy’s main job creators. But QE’s Operation Twist focused on buying long-term Treasuries and mortgage-backed securities. This meant that instead of going to the entrepreneurial job creators, loans went primarily to large corporations and to the government itself.

Supporters insisted that Operation Twist’s lowering of long-term rates would stimulate the economy by encouraging people to buy homes and make business investments. In reality this credit allocating is cronyism, an all-too-frequent consequence of fiat money.  Fed-created inflation results in underserved windfalls to some while others struggle.

Unstable Money:  Odorless and Colorless

Unstable money is a little bit like carbon monoxide:  it’s odorless and colorless.  Most people don’t realize the damage it’s doing until it’s very nearly too late.  A fundamental principle is that when money is weakened, people seek to preserve their wealth by investing in commodities and hard assets. Prices of things like housing, food, and fuel start to rise, and we are often slow to realize what’s happening. For example, few connected the housing bubble of the mid-2000s with the Fed’s weak dollar.  All they knew was that loans were cheap. Many rushed to buy homes in a housing market in which it seemed prices could only go up. When the Fed finally raised rates, the market collapsed.

The weak dollar was not the only factor, but there would have been no bubble without the Fed’s flooding of the subprime mortgage market with cheap dollars.  Yet to this day the housing meltdown and the events that followed are misconstrued as the products of regulatory failure and of greed. Or they are blamed on affordable housing laws and the role of government-created mortgage enterprises Fannie Mae and Freddie Mac. The latter two factors definitely played a role.  Yet the push for affordable housing existed in the 1990s, and we didn’t get such a housing mania. Why did it happen in the 2000s and not in the previous decade?

The answer is that the 1990s was not a period of loose money. The housing bubble inflated after Alan Greenspan lowered interest rates to stimulate the economy after the 2001 – 2002 recession. Greenspan kept rates too low for too long. The bursting of the subprime bubble put in motion a collapse of dominoes that started with the U.S. financial sector and European banks and led to the sovereign debt crisis in Europe, the Greek bankruptcy crisis, and the banking disasters in Iceland and Cyprus.

Other Problems Caused by the Weak Dollar

Many may not realize it, but the weakening of the dollar is at the heart of many other problems today:

High Food and Fuel Prices

As with the subprime bubble, the oil price rises of the mid-2000s (as well as the 1970s) were widely blamed on greed.  Yet here, too, no one bothers to ask why oil companies suddenly became greedier starting in the 2000s.  Oil prices averaged a little over $21 a barrel from the mid-1980s until the early part of the last decade when there was a stronger dollar, compared with around $95 a barrel these days.  Rising commodity prices spurred by the declining dollar have also driven up the cost of food. Many shoppers have noticed that the prices of beef and chicken have reached record highs. This is especially devastating to developing countries where food takes up a greater portion of people’s incomes.  Since the Fed and other central banks began their monetary expansion in the mid-2000s, high food prices wrongly blamed on climate shocks and rising demand have caused riots in countries from Haiti to Bangladesh to Egypt.

Declining Mobility, Great Inequality, and the Destruction of Personal Wealth

The destruction of the dollar is a key reason that two incomes are now necessary for a middle-class family that lived on one income in the 1950s and 1960s. To see why, one need only look at the numbers from the U.S. Bureau of Labor Statistics. What a dollar could buy in 1971 costs $5.78 in 2014.  In other words, you need almost six times more money today than you did 40 years ago to buy the equivalent goods and services. Say you had a 2014 dollar and traveled back in time to 1971. That dollar would be worth, according to the CPI calculator, a mere 17 cents. What has this meant for salaries?  According to statistics from the U.S. Census Bureau, a man in his thirties or forties who earned $54,163 in 1972 today earns around $45,224 in inflation adjusted dollars –a 17% cut in pay. Women have entered the workforce in much larger numbers since then, and women’s incomes have made up the difference for families. As Mark Gimein of points out, “The bottom line is that as two-income families have replaced single-earner ones, the median family has barely moved forward. And the single-earner family has fallen behind.”

Increased Volatility and Currency Crises

The 2014 currency turmoil in emerging countries is just the latest in a succession of needless crises that have occurred over the past several decades as a consequence of unstable money. Today’s huge and often-violent global markets, in which a nation’s currency can come under attack, did not exist before the dollar was taken off the gold standard. They are a direct response to the risks created by floating exchange rates. The crises for most of the Bretton Woods era were mild and infrequent. It was the refusal of the United States to abide by the restrictions of the system that brought it down.

The weak dollar has also been the cause of banking crises that have been blamed on the U.S. system of fractional reserve banking. Traditionally, banks have made their money by lending out deposits while keeping reserves to cover normal withdrawals and loan losses.  The rule of thumb is that banks have $1 of reserves for every $10 of deposits.  In the past, fractional reserve banking has been criticized for making these institutions unnecessarily fragile and jeopardizing the entire economy. Indeed, history is replete with examples of banks that made bad loans and went bust.  Historically, the real problems have been bad banking regulations.  In the post-Bretton Woods era, however, the cause has most often been unstable money. Misdirected lending is characteristic of the asset bubbles that result when prices are distorted by inflation. This has been true of past booms in oil, housing, agriculture, and other traditional havens for weak money.

The Weak Recovery

This bears repeating:  the Federal Reserve’s quantitative easing, the biggest monetary stimulus ever, has produced the weakest recovery from a major downturn in American history.  QE’s Operation Twist has not been the only constraint on loans to small and new businesses.  Regulators have also compounded the problem by pressuring banks to reduce lending to riskier customers, which by definition are smaller enterprises.

In 2014 the Wall Street Journal reported that this credit drought had caused many small businesses, from restaurants to nail salons, to turn in desperation to nonbank lenders—from short-term capital firms to hedge funds—that provide loans at breathtakingly high rates of interest. Interest rates for short-term loans can exceed 50%.  Little wonder there are still so many empty storefronts during this period of supposed recovery.  Monetary instability encourages a vicious cycle of stagnation: the damage it causes is usually blamed on financial sector greed. The scapegoating and finger-pointing bring regulatory constraints that strangle growth and capital creation.  That has long been the case in countries with chronic monetary instability, such as Argentina.  Increased regulation is now hobbling capital creation in the United States as well as in Europe, where there is growing regulatory emphasis on preventing “systemic risk.”  Regulators, the Wall Street Journal noted, “are increasingly telling banks which lines of business they can operate in and cautioning them to steer clear of certain areas or face potential supervisory or enforcement action.”

In Europe, this disturbing trend toward “macroprudential regulation” is turning central banks into financial regulators with sweeping arbitrary powers. The problem is that entrepreneurial success stories like Apple, Google, and Home Depot—fast-growing companies that provide the lion’s share of growth and job creation—all began as “risky” investments. Not surprisingly, we’re now seeing growing public discomfort with this increasing control by central banks. A 2013 Rasmussen poll found that an astounding 74% of American adults are in favor of auditing the Federal Reserve, and a substantial number think the chairman of the Fed has too much power.

Slower Long-Term Growth and Higher Unemployment

Even taking into account the economic boom during the relatively stable money years of the mid-1980s to late 1990s, overall the U.S. economy has grown more slowly during the last 40 years than in previous decades. From the end of World War II to the late 1960s, when the U.S. dollar had a fixed standard of value, the economy grew at an average annual rate of nearly 4%.  Since that time it has grown at an average rate of around 3%. contributor Louis Woodhill explains that this 1% drop means a lot. Had the economy continued to grow at pre-1971 levels, gross domestic product (GDP) in the late 2000s would have been 56% higher than it actually was.  What does that mean?  Woodhill writes: “Our economy would have been more than three times as big as China’s, rather than just over twice as large. And, at the same level of spending, the federal government would have run a $0.5 trillion budget surplus, instead of a $1.3 trillion deficit.”  And what if the United States had never had a stable dollar? If America had grown for all of its history at the lowest post-Bretton Woods rate, its economy would be about one-quarter of the size of China’s.  The United States would have ended up much smaller, less affluent, and less powerful.

Unemployment has also been higher as a consequence of the declining dollar. During the World War II gold standard era, from 1947 to 1970, unemployment averaged less than 5%. Even with the economy’s ups and downs, it never rose above 7%.  Since Nixon gave us the fiat dollar it has averaged over 6%:  it averaged 8.5% in 1975, almost 10% in 1982, and around 8% since 2008. The rate would have been higher had millions not left the workforce. The rest of the world has also suffered from slower growth, in addition to higher inflation, since the end of the Bretton Woods system. After the 1970s, world economic growth has been a full percentage point lower; inflation, 1.5% higher.

Larger Government with Higher Debt

By enabling endless monetary expansion, the post-Bretton Woods system of fiat money has helped propel the unchecked growth of government. In 1971 the total U.S. federal debt stood at $436 billion.  Today it is more than $17 trillion. It’s no coincidence that the federal debt has doubled since 2008, the same year that the Fed started implementing QE.

The Keynesian and monetarist bureaucrats who today set the monetary policies of the Fed and other central banks are like pre-Copernican astronomers who subscribed to the notion that the sun revolved around the earth. They are convinced that government can successfully direct the economy by raising and lowering the value of money. Yet, over and over again, history, and recent events, has shown that they are wrong.

What they don’t understand is that money does not “create” economic activity. Money is simply a tool that measures value, like a ruler measures length and a clock measures time. Just as changing the number of inches in a foot will not increase the building of houses or anything else, lowering the value of money will not create more wealth. The only way we will ever get a real recovery is through a return to trustworthy, sound money.  And the best way to achieve that is with a gold standard:  a dollar linked to gold.

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Duffy Duck's picture

Shit - Nixon’s historic ending of the gold standard was a response to being asked where the fucking gold was.

Yen Cross's picture

Ft. Knox is the largest tungsten repository on Earth.

Publicus's picture

Money creates economic activity when you print money to create jobs. (Eg: the Asian Miracle)

Money destroys economic activity when you print money and give it to the rich. (Eg: Fed's QE)

Yen Cross's picture

  printing moneys destroys future earnings through devaluation in a finite resource ecosystem.

  Our chlidren will pay for our excesses, unless one of (2) situations occur.  #1 War, or #2 a collaborative global reset...

 The SDR will NEVER happen folks.( not in our lifetimes) The banksters and .govs need "black budgets. We've seen the apex of currency centralization.

 Won't happen period! I trade currency for a living. 5% of currency traders make money. I make money.

  SDR will NOT happen, and is a pipe dream for idiots that don't understand monetary flows.

gatorboat's picture

"Gold is money.  Everything else is credit."  -- JP Morgan

Non-redeemable paper currency isn't money, it's credit.  SDR is just another non-redeemable paper currency issued by another quasi central bank (the IMF).   Ok, maybe it won't be physical paper currency, just digital, but it's the same thing.  

Banks can issue an infinite amount of credit created out of thin air. There's no limit, even in fractional reserve, because the reserve is also credit created out of thin air.

We don't have money today, we have credit.  Bank notes are credit, not money.  Federal Reserve Notes are bank notes, which is credit, not money. 

JP Morgan said so himself.  Perhaps the greatest banker of all time.  He knew the difference between money and credit.

SDR is IMF bank notes, same thing, even in purely digital form, it's still just credit.

These non-redeemable paper currency credit games will end if a significant player on the world scene comes out with a redeemable currency.  That's all I have to say.

Duffy Duck's picture

The US government could issue its own fiat currency.  A United States Note would be printed, but unlike the FRN, would not be a loan, at interest, at creation.  It wouldn't be *loaned* into existence, simply printed by the government.


Naturally, much else would have to change down the line, more than will happen in our lifetime excepting violent revolution to end the absurd FRS.  But while all fiat, mathematically, has a finite life, it could work much better if the issuing power was taken from the private banks and restored to the federal government. 

I differ from many here in that while I believe gold-backing has its benefits, the problem is who hoards the gold, who stores it - the gold standard is not likely to be the cure-all people seem to think it is.

I think the fundamental problem, and its just my opinion, is who has the issuing power, not the species or token of exchange.

If private banks are issuing the public currency as a loan at interest - "the economy" will always be in chains at their feet.


TeethVillage88s's picture

Yen Cross;

Just a question for consideration, I know this is simplistic.

If the Population increases and the Money Supply does not... is there enough money for everyone. So, Shrinking Money Supply while Labor Force Supply Increases. This might be Deflationary, create austerity type conditions, reduce the velocity of money, and decrease economic activity.

Supposedly, this proves that money supply should maintain a ration to the population or household or labor force.

Bossman1967's picture

Another simple question is money is just a tool to buy things you want and pay people a wage for work.why not just give everyone a bail out make them spend it and stimulate the economy the right way instead of giving it to the rich the people that deserve it ,the worker will make a capitalistic system thrive. And reinstitute a no work no eat policy if your able and I FEEL 90 percent plus are able to do something no free rides and this is coming from a businessman

TheAntiGov's picture

Too many of anything, reduces its value.

NidStyles's picture

In the history of money; a country where money is a higher valued asset, there has been nothing but prosperity for the largest percentage of the population. When the currency is diluted, only those with first access prosper.

barre-de-rire's picture

ur childs will pay with what, monkey peanuts ?


1984 scheme, no physical money but point/credit. you exchange points for physical goods.

worker got 3000clothings pts/year, a pyjama cost 600, so wilson sleeps naked. as simple as that.


best way to bottom linearize humanity of poor workers is  money supressing, replacing with such system. from this point, elite support system by giving basic needs to workers for  an amount of work, and rich can take & use whatever  they want without even be scare of any hypothetical loosing in a market, because there is no more market.







sleigher's picture

You had me at black budgets.

TeethVillage88s's picture

I agree with these point. Also I don't think any one solution is going to fix both the Government & the Economy. It is a system of systems. Many Systems need many reforms. That is why a crisis probably will lead to the next small one issue fix. Which will fail. we need reformers. And the people that are making money now & have good businesses will understand that Reforms are going to hurt them from the beginning.

Repost since fits the article topic:

If Liberals Take all the Tools off the Table in terms of Capital Controls, Tariffs, Off Shore Tax havens, Capital Flight, Stagnant Capital, Economic Leakage, Tax Loopholes, Tax Policy, Fancy Pants Derivatives,... then maybe we need to Lynch the Economists, Bankers, and Politicians that put us here, kick out the Neoliberals

Simplify & Standardize:
- GAAP Accounting Rules
- Standardized Financial Instruments that a 13 year old could understand
- Individual Income Taxes
- Corporate Income Taxes

Note: ALL those "No Value Added" Employees in Bookkeeping, Accounting, Taxes, Financial Planning, Tax Lobbying, tax Law, Finance Law... they could be free to add to our Great USA in a meaningful way that adds to GDP.

Problem: How to unwind $700 Trillion in Derivatives. Solution is phased plan to break up TBTF Banks.

gatorboat's picture

Of course none of your proposed solutions will be implemented.   TPTB have their highly profitable ponzi scheme and they're not about to give it up.

TeethVillage88s's picture

Yes, and I left a bunch of unaddressed issues sitting there.

It is like there is a bunch of levels in life, in employment, in government, in business... and we just aren't on the inside. That might be tolerable except that the Federal Government Gives away subsidies, contracts, privatizes government functions by awarding huge federal contracts, gives away tax breaks, reduces enforcement of normal environmental & safety standards (think BP Oil Spill),... and this is all without considering the Federal Reserve... and not considering that the Burning Issues of the Day are ignored by Congress, Completely & Utterly.

Oh there is an American-European Network, and you ain't in it.

Winston Churchill's picture

Easy to get get rid off if you actually wanted to.

Concentrate them all in a non recourse sudsiduarys and then fold

those subsid.all at once.

It would wipe out banker bonuses, so it will never happen

TeethVillage88s's picture

Thanks for the idea. Bankers make bonuses on new business right. So if we destroyed derivatives through a non recourse subsidiary what the hell do they care personally. But there maybe be other kinds of push back or blow back. Holders of the Derivatives want something back as they are considered assets. Take Paul Singer.

FreeMktFisherMN's picture

Nope. Printing period is disastrous. Mal investment and rising prices and numbed from economic realities all ensue. Money facilitates trade but a limited supply is not a hindrance. Gold is divisible and more productivity means less gold needed to buy stuff. Not that complicated.

Bemused Observer's picture

Yes, and you know if you follow that logic, then gold ultimately leads us to no currency. Which I think is the point. Who is to say that the current way is the only way? There are ways of organizing economies that we haven't even considered yet, because we are shackled to our currencies.
Using gold allows us to see how increasingly irrelevant the whole idea of currency is, by shrinking over time to insignificance in an economy that is really growing. At some point, it will be more trouble than it is worth to use a middleman (at least for most everyday transactions), and we would be able to just abandon it and be on to something more effective, using gold currency only for the largest of transactions.
And maybe that is the whole point. Maybe big banks and international corporations shouldn't be conducting business in the same currency that we average folks use to survive on. And maybe they should be forced into using a currency that imposes its own discipline, apart from central bankers.

FreeMktFisherMN's picture

Obviously transactions predicated on gold as the money don't need to have physical gold exchanged between the two people explicitly. Things like Paypal would still exist, and there would be institutions of sound repute and integrity that house gold for you and you draw on those funds, and the ones that speculate and take on risk and do fraud get rooted out by market forces instead of the FDIC, which is an abdication of responsibiltiy of people and leads to huge conflagrations.

Money has to have integrity to store value, and the difficulty of mining gold and its luster, durability, fungibility, divisibility, etc. make it the choice throughout history. Without that solid yardstick (and the yardstick moves a bit only as productivity increases as the money gets stronger, as opposed to yardstick moving via forex and all the shenanigans in COMEX, etc. or by fiat pricing something as x dollars/ounce instead of letting it fluctuate in a true market) putting real economic value on things  gets so distorted and it leads to malinvestment as paper is not real capital. Gold is not capital in the sense that it is not buildings and structures, but it represents a sound claim on those resources for investment, and allows people to not have to use barter to exchange.

People can use what they want in a truly free society. Gold I know would win, though. I have no problem with digital currencies trying to compete, but gold still will win. 

Bemused Observer's picture

You make a good point. There would be many different ways of conducting business, and it would involve agreement between the participants as to what they'd use for the particular transaction they were engaged in.

Of course, that would make it impossible to conduct the 'skim' on all our income, and the fees from all our transactions.

I think we have to separate the economy of the everyday folks from the economy that is agonizing over multi-trillion dollar debts and quadrillion dollar derivatives, and blowing so-called values through the roof. Which just makes everything more expensive for us, since we all use the same 'currency'.
And think of it...if this was the case in 2008, it would have been impossible to use the taxpayers to fund the bailouts. You would have had to convince them to actually hand over gold, since that would be what was needed for those big guys. If we were using say, silver coinage, or even our extra zucchini, for everyday purchases, they'd have to get our silver and garden vegetables first, then exchange it for gold in order to do their business.

Isn't there some saying about gold being the currency of kings, silver being for the middle class, copper for the poor, and debt is the currency of slaves? Maybe there's something to does seem to acknowledge a difference in the economies and currency needs of those different classes.

TeethVillage88s's picture

Bemused Observer

You made an important point about non-electronic transactions and private trades or barters for goods and services.

Hard to Over-estimate the importance of this or the utility of this in a "Big Brother" society.

You have interesting ideas.

TeethVillage88s's picture


Hey, I might collect some gold to hedge, but not to use as currency.

Feel me here? You can stock pile a bit in your teeth or jewelry, but you have no currency in gold.

How many poor or middle Class have gold to use for currency?

Answer: Gold Bugs suggest total reset, but most of us without gold will face poverty and no power at all upon gold conversion. Not saying there is no value in Gold Standard, I would say Precious Metals Index or Stock Pile to Represent Currency is much better way.

IF US can spend $5 Trillion on War OR $10 Trillion on DOD Budget for last 12 Years... then why not secure National Stock Pile for Precious Metals??????????????


FreeMktFisherMN's picture

I'm an an-cap so anything to do with the state I want no part, as I don't want statism to exist.

When I say 'gold' I mean silver, platinum, palladium, too. Gold is indeed so valuable per ounce that it is for big ticket items probably more so whereas silver is exchanged more.

I don't want a gold standard, as far as a politician decreeing what the fixed statist endorsed value is. I want a free market for currency, too, and gold will always win if there is no statist entity. History shows how gold is always looked at as a store of value.

Over time gold/oil ratio and things like that hold steady if not gold getting stronger, so gold is the way to store value for later consumption or investment.

TeethVillage88s's picture


Well how to deal with the US Fiat sitting at Rest, In accounts, Being Horded, Inflated by the Fed, and Inflated by Federal Budgets. I have posted some ideas for 4 years or so. Here is a couple.

A) Exile the Big Executives OR Big Bankers that have committed Fraud or Looted our Capitalist Corporate Assets
B) Quarantine Shadow Bankers or those that Rehypothicate to the tune of 40:1 in derivatives or Rehypothicate Assets or Naked Short to get rich OR Drive US Businesses into the Dirt
C) Convert US Dollars in Off shore Accounts or US Accounts into "Pacific Dodo Dollars- PDD" which doesn't exist and for which there is no coin or currency and set the value to 20 to 1 PDD to USD. Badda Bing Badda Boom.

FreeMktFisherMN's picture

I'm an an-cap so anything to do with the state I want no part, as I don't want statism to exist.

When I say 'gold' I mean silver, platinum, palladium, too. Gold is indeed so valuable per ounce that it is for big ticket items probably more so whereas silver is exchanged more.

I don't want a gold standard, as far as a politician decreeing what the fixed statist endorsed value is. I want a free market for currency, too, and gold will always win if there is no statist entity. History shows how gold is always looked at as a store of value.

Over time gold/oil ratio and things like that hold steady if not gold getting stronger, so gold is the way to store value for later consumption or investment.

Duffy Duck's picture

prices/costs should tend to go down, but apparenty the cost of a "growing economy"  is expanded M and rising prices and diluted {if I may} purchasing power.... so, and I'm asking, doesn't limited money supply arrest the economic development that could otherwise happen in our fiat/frac reserve universe?

Another thing - economists are not "economical".  To be economical would involve avoiding waste, which means things like ensuring longevity.  But it is manifestly not in the corporate interest to, say, make a car that lasts 20 years, or a computer built to be more easily upgraded/modular...  it's more efficient to cure a disease say, but its more profitable to treat it and have a lifelong purchaser of medicine.


I'm not delivering some anti-capitalist screed, I'm just kicking the tires.  There's fraud, and there's waste, or friction/drag in any ultimately physical system.  To what extent, if any {again, just asking, not arguing a position as such} do you think the profit motive might work against being "economical", saving time/energy/resources, and hence, counter-productive.  Again, I'm not saying "profits are per se bad" - I'm asking if the profit motive is sometimes myopic, or overall wasteful, and costs future or futher productivity...


I don't think we ever need to throw out baby with bath-water, but not only am I bothered by the Gates and Buffetts having more than they could ever spend while children in Africa starve in some "ethical" sense - I also think it is incredibly wasteful and harmful to the overall system - a monetary clot.  Waxing more philosophical, I also think that humans, as a resource, go untapped when they are in conditions of no education, near starvation, etc.  I'm not suggesting government redistribution or anything of the sort - but the idea of the 0.01% having so much as hundreds of millions lack reliable clean drinking water....


Well, some things are more important than money, and a criticism of libertarian thinking I hear from friends and family is that libertarians seem to think nothing is.  I don't necessarily think so, but I haven't had a good answer for them other than to suggest private actors could be working to fix the problem rather than merely lobbying government to rob Peter to pay Pablo.


TeethVillage88s's picture


Could be your statements are too simple for government use or for analysis. In theory I am with you on Asian Miracle.

- Fractional Reserve Banking Ratio is like 10:1 lending, so like 9 dollars is created magically
- Federal Government Budget expansion is like North of 10% under Obama, without the Economic GDP Growth to justify it, currently velocity of money is close to 1% depending on how you measure
- Federal Reserve Money Creation, we don't really get to audit them, we don't know how much might have been lent out or given away...
- Banking Reserves would tend to decrease money supply if increased, but is a Safety Factor or Reserve Level needed to make sure the system works... shrinking the reserves can increase the supply of banking funds at increased risk.

Fed Money Data updated from Jan 2014

M1 Money Stock, 2014-06-16: $2.83 Trillions of Dollars (Exponential Growth, but doesn't include Dollars overseas)
M2 Money Stock, 2014-06-16: $11.32 Trillions of Dollars
MZM Money Stock, 2014-06-16: $12.54 Trillions of Dollars (Money with zero Maturity)

Looks like 1981 was the Money Velocity high, note manufacturing plunged 1979. (Top was 2007 Q4 at 10.7, now down to 6.3) (Top was 1997 Q3 at 2.2, now down to 1.5) (Top was 1981 Q1 at 3.5, now down to 1.4) (Top was January 1987 at 3.1, now down to .7) (Employees: Manufacturing 12.1 M Persons)

M1V M1 Velocity of M1 (6.305 Ratio)
M2V M2 Velocity of M2 (1.540 Ratio)
MZMV MZM Velocity of MZM (1.386 Ratio)
MULT M1 M1 Money Multiplier (0.705 Ratio)

Federal Debt: Total Public Debt
2014:Q1: 17,601,227 Millions of Dollars (+ see more)
Quarterly, End of Period, Not Seasonally Adjusted, GFDEBTN, Updated: 2014-05-29

Mesquite's picture



You said it for me..

I've actually observed this truism over the decades..

$ directed to 'Capitol Projects' puts people to work, upon completion..

And many skilled trades and labour to work during the construction..

Then those paychecks filter into the economy..

The more recent paradign (cronyism) just places $ into hidden offshore private accounts,

benefitting the elite.. And the general population's situation goes downhill, which places

more burden upon gov't coffers...

This isn't theory.. It's the reality over the last half century plus that I've been looking at it

and living it...

Publicus's picture

It's simple really, print money to increase/fund jobs, and self sufficiency. Look at how Japan is printing money to build solar panels... They just need to cancel their debt and print money out of nothing again and all will be well. 


Too many people? Print money to fund research jobs. There is no need for debt, nor tax for anyone. Fund goverment activity by printing money.

Those money printed eventually all ends up at the hands of the rich, so just cancel those money periodically and you can maintain balance.

TeethVillage88s's picture

Here is an Idea:


In an Ideal world, if a Reformer was US President & had Reformers in Congress to support him.

Couldn't we identify the Wealthy Fiat Horders, Big Shot Executives & Former Executives...

Then Convert their Currency Accounts in a New Currency Called the "Pacific Doddo - PDD"... with no actual cash or coins unless they mint them themselves. And we would set PDD to 20 to one US Dollar.

This would take a lot of the Excess US Dollars out of Circulation.

ejmoosa's picture

Bullshit.  When they print it, they effectively take money out of the hands of others and spend it.  It's stealing.


My assets are mine.  Not yours or some government's.  And if I do not see a reason or motivation to invest or spend it at any particular time, that is my choice.


If you want to create economic activities, eliminate the rules, regulations, taxes and other barriers that reduce profitability.  


It's that simple.  Economies expand when there are profits to be made.  Profit growth is the key factor to expansion.

Publicus's picture

Nah, print moeny to fund salaries. Then cancel the excess money that is pooled at the hands of the rich periodically.

Publicus's picture

Nah, print moeny to fund salaries. Then cancel the excess money that is pooled at the hands of the rich periodically.

TeethVillage88s's picture

Plus one for your avatar.

I assume you would not want to live in China and you remember rivers on fire in the USA and GE Polution in (Hudson or Chesapeake River that Pete Seger helped clean up).

"...If you want to create economic activities, eliminate the rules, regulations, taxes and other barriers that reduce profitability..."

Corporations need limits as well as Governments. Self Evident, Right?

Simplify, Streamline, Standardize = Accounting, Financial Instruments, Articles of Incorporation, Limits on Government, Limits on Money's Influence, Limits on Conflict of Interest, Limits on Gift Giving to Politicians & Government Workers to the bare bones $1 dollar per....


If Liberals Take all the Tools off the Table in terms of Capital Controls, Tariffs, Off Shore Tax havens, Capital Flight, Stagnant Capital, Economic Leakage, Tax Loopholes, Tax Policy, Fancy Pants Derivatives,... then maybe we need to Lynch the Economists, Bankers, and Politicians that put us here, kick out the Neoliberals

Simplify & Standardize:
- GAAP Accounting Rules
- Standardized Financial Instruments that a 13 year old could understand
- Individual Income Taxes
- Corporate Income Taxes

Just thing all those "No Value Added" employees in Bookkeeping, Accounting, Taxes, Financial Planning, Tax Lobbying, tax Law, Finance Law... they could be free to add to our Great USA in a meaningful way that adds to GDP.

stant's picture

It's the largest building needed pressure washed and weedeated last time I was by there. It's guarded to keep folks thinking there's something still there

gatorboat's picture

Ft Knox is the largest EMPTY repository on earth.

Kirk2NCC1701's picture

Ah, that'd explain why Warren Buffet has "cornered the Tungsten market", and why he calls gold "an ancient relic":

He thought he was buying Precious Metal, but got Precious little gold in them bars.

snodgrass's picture

After Clinton stole the gold in Ft. Knox and gave it to the Rockefellers, he left nerve gas in there instead.

F0ster's picture

FreeGold is the answer...

Citation FOFOA

juangrande's picture

Who said the "policy mistakes" were mistakes?

good man's picture

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do...

LetThemEatRand's picture

He's right, but the global economy is run by bankers and oligarchs.  Like a guy named Forbes.  They sold the physical gold owned by the people to themselves at depressed prices, funded by taxpayer dollars used to short paper markets.  When the shit hits the fan, they will own this fucking place once and for all.  And to put an exclamation point on it, they will probably outlaw private gold ownership for all but central banks.  And guys with last names like Forbes.

COSMOS's picture

Thats ok, i have been stocking up on bullets to take their gold when the time comes.

LetThemEatRand's picture

That's what it is going to come to, sadly.  Seriously. 

TeethVillage88s's picture

Some of their Foreign Buddies will own the place too.

They will keep preaching about Privatization after the crash as well. ($26 Trillion Foreign Owned Assets in the USA, no more than $14 Trillion are US Treasuries, Bonds & Equities, so could be $12 -$14 Trillion in Foreign Owned Real Estate)

And with DHS all Cowboyed up, they can enforce UN, UNESCO, CAFTA-DR, TAP, TPP, or Foreign Claims easily. Hello Toll Roads, Toll Bridges,...

LetThemEatRand's picture

The globalists who own the place don't recognize borders, except as needed to create division amongst us.

BobPaulson's picture

Armed insurrection gets harder and harder as the oligarchs stockpile technology to suppress the masses. A rifle doesn't do much to a drone.

Hobbleknee's picture

And yet the most powerful military on earth can't defeat cave dwellers armed with rifles in turd-world countries.