A Thought Experiment: Why Not Just Print, Print, Print And Then Print Some More?

Tyler Durden's picture




 

In the past we have jokingly discussed the creation of a Death Star as the way the world can save itself by printing an almost infinite amount of money to support growth. As almost everyone, especially the MMT crowd it seems, can plainly see, if printing some money is good (well it must be, markets are up) then printing more money must be better, right? Well, no (as we discussed in detail here). There are unintended consequences and as we pointed out recently, we are already seeing less and less effervescence in the real economy from QE's impact and the spectre of the inflationary pressures that implicitly limit the 'benefit' of this action is nowhere more painful than in energy prices (and in fact the price of anything in relative limited supply as opposed to cash which is printed daily). Professor Antony Davies, of Duquesne, takes this subtle concept to task in this exceptionally straightforward 206-second video on money as an IOU and its solution to the caveman's ills providing the background for why money's inherent value is relinquished once it becomes printed en masse. Printing more money doesn't make more goods and services appear, simply spreads the value of the existing goods and services among a larger number of dollars - this is inflation. Our wealth comes not from money but from the goods and services that money buys. Q.E.D.

 

0
Your rating: None
 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 04/04/2012 - 10:50 | 2316362 tabasco71
tabasco71's picture

The fed is the biggest pharma company in the world - they make the money drug, which behaves just like all the other ones.

Wed, 04/04/2012 - 10:53 | 2316372 Chief KnocAHoma
Chief KnocAHoma's picture

The lineup! How long would it take Bernank to resign if this was Mitt's team!

http://annoyanidiot.blogspot.com/

Wed, 04/04/2012 - 11:07 | 2316416 Amagnonx
Amagnonx's picture

Ron Paul - President, Gary Johnson - VP, Andrew Napolitano - Secretary of State, Rand Paul - Secretary of Defense.. and Jim Grant Fed Chairman (to preside over its final days ).  Hi ho silver away ..

 

Libertarian nation - no war, no inflation, balanced budgets and goodbye CIA, DHS, NSA, FBI, Dept Education, etc etc

 

Unfortunately even if RP is elected he would need to invoke emergency powers to sieze the media so he would stand a chance against the CIA and friends, by exposing them on TV (because for Americans - if its not on TV it didn't happen) - if that succeeded and they had some trustworthy people put in to head the police, then they could actually get stuff done without too much fear of being assassinated.

Wed, 04/04/2012 - 11:16 | 2316435 hedgeless_horseman
hedgeless_horseman's picture

 

 

Our wealth comes not from money but from the goods and services that money buys.

Except for bankers, as their wealth comes from debt, specifically the interest payments they receive. 

Banks and the politicians they own see debt as wealth, because it is, for them.

 

Wed, 04/04/2012 - 11:17 | 2316455 jal
jal's picture

For the last 30 years, growth was being generated by borrowing.

The borrowed money did not exist. It was created, (heheh, God Work)

 

Can borrowing, (creation of money), continue without paying back the lender with interest?

 

Who or what organization is capable to continue lending without getting their loans paid back?

 

How long can loans be given out with only a token cash flow coming back to the lenders?

 

At some point in time, there has to be loan forgiveness and a rebalancing of the books. (There has to be a recognition that bankers are false gods)

The participants of all this fraudulent accounting are well aware of what is happening and must continue the pretend game.

 

There is no other game in town.

Wed, 04/04/2012 - 11:36 | 2316525 mayhem_korner
mayhem_korner's picture

 

 

You can substitute "default" for "loan forgiveness"...

Wed, 04/04/2012 - 12:26 | 2316737 Buzz Fuzzel
Buzz Fuzzel's picture

"Our wealth comes not from money but from the goods and services that money buys."  NO it is actually even simpler than that.  Wealth is the sum of unconsumed human productivity.  Wealth comes from the labor and creativity of human beings.  Money is a representation of wealth.  More money subdividing the sum of unconsumed human productivity does not equal more wealth, unless of course you have gone down the rabbit hole with Alice.

Wed, 04/04/2012 - 13:53 | 2317081 withnmeans
withnmeans's picture

The Kool-Aid "TM" analogy.... Lets say the whole United States population wants Kool-Aid, and the problem is we only have 1 packet. Well, the government thinks this is an easy fix, just add about a few TRILLION gallons of water, Voila'

Hey, its still Kool-Aid.....  However it is only in minute trace amount, just like our "Weimar Republic Dollar".

Wed, 04/04/2012 - 12:03 | 2316616 Dicite justitiam
Dicite justitiam's picture

The other side of that coin is that their wealth comes their monopoly on payment and settlement systems.  By extension, our conventional wealth comes from their permission to let us use this apparatus--thanks guys!  It kinda sucks to think that even if I protect what I've earned by being clever in advance of massive fiat catastrophe, that I will still rely on an international settlement system to exchange that value for anything I cannot physically settle, in person.

It also blows my mind that antitrust law seems to give a pass to the single most powerful corporate trust on US soil besides the Fed, DTCC. 

It's like that gorilla you never noticed, even though it waved at you.

Our veins (settlement/clearning), our blood (fiat currency), and our heart (monetary authority) have all yielded to the parasite.

Wed, 04/04/2012 - 11:19 | 2316460 TheGameIsRigged
TheGameIsRigged's picture

No....they would mos def assassinate him before he had the chance to do any good. 

Wed, 04/04/2012 - 11:20 | 2316463 GeezerGeek
GeezerGeek's picture

Bolton for Secretary of State. Put Andrew Napolitano in as Attorney General.

Seriously, though, "he would need to invoke emergency powers to sieze the media" is a bizarre suggestion for a libertarian president. Sort of like a certain elected president bemoaning the existence of the Constitution or having to deal with Congress or the SCOTUS.

What's needed is a good, libertarian-minded dictator for a few months. The only person I'd trust in that position is...ME.

Wed, 04/04/2012 - 12:09 | 2316646 GlobalCtzn
GlobalCtzn's picture

Bolton is a total putz! A cog in the existing sick machine.

Wed, 04/04/2012 - 12:39 | 2316783 TheFourthStooge-ing
TheFourthStooge-ing's picture

No kidding. Bolton is a neocon dickhead that will gladly fellate anyone advocating endless war.

 

Wed, 04/04/2012 - 22:43 | 2318332 piceridu
piceridu's picture

Dude Bolton? I hope you're talking about Michael Bolton...

Wed, 04/04/2012 - 11:20 | 2316465 hwwesq3
hwwesq3's picture

My thought experiment:  why not have the Fed buy treasuries at maturity?  The exchange of fiat money for matured treasuries creates no new wealth to (possibly) circulate through the economy.  Bondholders then have cash to buy new bonds.

The matured bonds become a line item on the Fed balance sheet called "Maiden Lane XXX" which can sit there forever.  Because the bonds have matured, no future interest is owed.

Slowly, the outstanding debt lowers and the government pays less and less interest.

Other than the Fed eventually having a balance sheet exceeding $16 trillion of made-up money, wouldn't this solve the national debt problem? 

Wed, 04/04/2012 - 11:39 | 2316541 BigJim
BigJim's picture

 The exchange of fiat money for matured treasuries creates no new wealth to (possibly) circulate through the economy

'new wealth'? - the fed doesn't create this in any case.

The purchase of treasuries for instantly created fiat does however create new currency to circulate through the economy - ie, such a move would (will!) be inflationary.

Wed, 04/04/2012 - 12:12 | 2316653 hwwesq3
hwwesq3's picture

But currently the Treasury pays the owner of the bond at maturity.  That doesn't create new currency.  The bond owner has no more money either way, simply exchanging a piece of paper that says he's worth $10,000 for pieces of paper that say he's worth $10,000.

But where the Fed pays $10,000 for a $10,000 bonds, then simply books it, the Treasury is releived of the need to float more debt to buy back bonds.

Over time, the "national debt" decreases (no need to pay off bonds at maturity) and the Fed just books the amount as an asset of the Fed.

Wed, 04/04/2012 - 11:43 | 2316555 mayhem_korner
mayhem_korner's picture

 

 

That's like Newman eating the muffin stumps.

Wed, 04/04/2012 - 13:58 | 2317095 MachoMan
MachoMan's picture

First, the expansion of the money supply necessarily causes inflation. You say that it creates no new wealth to possibly circulate through the economy, aside from a tic on the definition of wealth, I would say this only works, at least temporarily, when velocity is slowed to a crawl... In short, that currency would not have been available otherwise.

Second, practically speaking, BOND HOLDERS DO NOT WANT NEW BONDS. Our creditor nations are dumping the shit like the currency was getting devalued or something.  Thus, the ability of bondholders to buy new bonds is moot (they don't want them anyway and sure as hell not at these rates).

Third, the duration of our debt is an impediment...  In other words, the maturities of these debts come quickly...

Fourth, the FED credits back the interest to the treasury...

A viable solution does not involve any additional misallocations of resources...  period...  it's as simple as that.

Wed, 04/04/2012 - 10:51 | 2316365 Silveramada
Silveramada's picture

silver investors are always happy:

a) they manipulate the market down i LMAO and buy more

b) silver goes up i am happy i have my money in something real

just buy silver today, Ben bullshit is a gift

Wed, 04/04/2012 - 10:53 | 2316375 mayhem_korner
mayhem_korner's picture

 

 

Just ordered 200 oz of shiny new maples. 

Joy!

Wed, 04/04/2012 - 11:20 | 2316467 Silveramada
Silveramada's picture

great! how much over spot?

 

Wed, 04/04/2012 - 11:30 | 2316505 mayhem_korner
mayhem_korner's picture

 

 

Around $US2.05/oz. 

Wed, 04/04/2012 - 11:36 | 2316527 Silveramada
Silveramada's picture

good price man

Wed, 04/04/2012 - 11:38 | 2316536 Silveramada
Silveramada's picture

got few more mexican libertads at .85 over :) picked my own dates too

Wed, 04/04/2012 - 11:27 | 2316500 czarangelus
czarangelus's picture

I have to save for a year to buy that much. :(

Wed, 04/04/2012 - 11:41 | 2316534 Zero Govt
Zero Govt's picture

Silver (hammered) down -6% today

looks like the downtrend continues for a while yet

 

 

Wed, 04/04/2012 - 11:47 | 2316571 mayhem_korner
mayhem_korner's picture

 

 

Sure it's a "down trend" and not a margin call on those highly-leveraged equity funds.  So they hammer silver down to what...+14% YTD?

Wed, 04/04/2012 - 11:42 | 2316550 Thisson
Thisson's picture

That's the problem with silver though, people only want it when it's shiny and new, not when it gets oxidized after 30 years of storage.  I'd rather have Gold so I dont have to worry about it losing its luster.

Wed, 04/04/2012 - 11:48 | 2316575 mayhem_korner
mayhem_korner's picture

 

 

I got a good stack o' them, too.  This just happens to be silver month in the rotation.  :)

Wed, 04/04/2012 - 11:52 | 2316584 Silveramada
Silveramada's picture

hhmm T that is not 100% true, the metal value is the same unless you have major ring damages, filing, acid exc exc, but if you buy generic .999  silver the difference is minimal, numismatic coins if polished/cleaned can loose big part of their value,many morgan dollars pre '21 with nice original tone can be actually more valuable & desirable than white shining coins sometimes... then you know, in gold too, when you see a small copper spot is a turn down as well in price... 

Wed, 04/04/2012 - 10:51 | 2316366 mayhem_korner
mayhem_korner's picture

 

 

I don't think I've heard "effervescence," apart from Alka-Seltzer, in 30 years.  I tip my hat to the Tyler word doctors.

Wed, 04/04/2012 - 11:00 | 2316396 Dr. Engali
Dr. Engali's picture

Yeah playing scrabble with them could be a bitch.

Wed, 04/04/2012 - 11:08 | 2316424 Son of Loki
Son of Loki's picture

"Plop, plop, Fizz fizz..."

http://www.youtube.com/watch?v=bxjb2UJZ-5I

Wed, 04/04/2012 - 10:52 | 2316369 fonzannoon
fonzannoon's picture

What if not everyone has twice as much money? What if only a few people have multiples more money, and the masses have less?

Wed, 04/04/2012 - 10:57 | 2316383 SheepDog-One
SheepDog-One's picture

No doubt thats where they screwed up this time. The Germans were at least smart enough to make sure the printing went to the people, so that when it bit them in the ass at least they had wheelbarrows full of money to buy a sausage or 2. In this case, only a few at the top are buying $300K bottles of champagne at niteclubs while 99.9% are broke. Good luck going forward Ben, you'll need it big time.

Wed, 04/04/2012 - 11:00 | 2316397 SheepDog-One
SheepDog-One's picture

Again with the every post down vote. Screw it why even bother writing here, assholes.

Wed, 04/04/2012 - 11:06 | 2316418 Dr. Engali
Dr. Engali's picture

I think some people just vote down to be idiots.

Wed, 04/04/2012 - 11:23 | 2316477 nope-1004
nope-1004's picture

More like "asshole".  Not sure why it even bothers you - the fact that it does means whoever is doing it will keep doing it.

 

Wed, 04/04/2012 - 11:37 | 2316535 Dr. Engali
Dr. Engali's picture

It doesn't bother me. If somebody disagrees with my comment or postion more power to them.

Wed, 04/04/2012 - 11:07 | 2316423 fonzannoon
fonzannoon's picture

Dude someone is fkin with you and probably sees me telling you it's not me and is making it look like it's me.  Fk em.

Wed, 04/04/2012 - 11:08 | 2316426 CrashisOptimistic
CrashisOptimistic's picture

There is never a good reason to comment on any blog.  One does it to discuss.  ZH discussion is better than most in that every once in a while a solid fact rather than opinion is offered.

The comments average slightly better than the articles, on average.  There are exceptions, and there are bad days, but on average, the article writers are slightly inferior.

Wed, 04/04/2012 - 11:24 | 2316483 mayhem_korner
mayhem_korner's picture

 

 

Interesting perspective.  I wouldn't handicap the article-writers against the commenters.  Different parts of the value chain.  It's also much, much more demanding to post original material than to be an at-will commenter.  That said, I would agree that there is often as much or more content and insight in the collection of comments than in the articles.

Wed, 04/04/2012 - 11:22 | 2316472 francis_sawyer
francis_sawyer's picture

Was it over when the Germans PRINTED Pearl Harbor?

Wed, 04/04/2012 - 11:44 | 2316561 Calmyourself
Calmyourself's picture

Blow it off...  We all pick up the down bots, forget it..

Wed, 04/04/2012 - 11:52 | 2316589 Iwanttoknow
Iwanttoknow's picture

You are absolutely right.

Wed, 04/04/2012 - 12:04 | 2316625 pods
pods's picture

Don't let it get to ya SD1, lots of passive aggresiveness going on as of late.

Wait till the next leg down starts.

No worries, I am not offended by the asshole remark, as I can be quite a fine one at times!

pods

Wed, 04/04/2012 - 13:43 | 2317026 BooMushroom
BooMushroom's picture

Fuck 'em if they can't take a joke. Haters gonna hate.

Wed, 04/04/2012 - 12:11 | 2316657 Herkimer Jerkimer
Herkimer Jerkimer's picture

Well, I would hypothesize that the general value of the goods and services are essentially controlled by the general masses, that have less money and therefore the prices for those products will stay low, like food, because the pions just can't afford them.

 

So the ones with all the money, have effectively, increased their purchasing power.

 

Hmm....

 

•J•
V-V

Wed, 04/04/2012 - 19:46 | 2317977 StychoKiller
StychoKiller's picture

Peon = Worker-Slave, Pion = Quantum particle

Do NOT follow this link or you will be banned from the site!