Thorsten Polleit, of the Frankfurt
School of Finance & Management, penned an
article in The Free Market newsletter of the
Ludwig von Mises Institute titled "The Many Names
for Money Creation".
It starts off almost
humorous, reading more like an interesting,
mood-lightening sidebar to a banner article titled
"We're Freaking Doomed (WFD)!" as he notes that
the dire economic conditions are such that
"euphemisms have risen to great prominence. This
holds true in particular for monetary policy
experts, who are at great pains to advertise a
variety of policy measures as being in the
interest of the greater good, because they are
supposed to 'fight' the credit crisis."
He
then illustrates how the term "unconventional
monetary policy" is meant to convey the happy
virtues of "courageous and
innovative", as opposed to
the bad old "conventional" monetary policy, which
is now "outdated".
In a similar vein, he
notes that "Aggressive monetary policy" is meant
to signify "bold and daring action for the greater
good", and "quantitative easing" is just a
confusing term used to make it difficult for
people to see "what such a monetary policy really
is - namely, a policy of increasing the money
supply (out of thin air), which, in turn, is equal
to a monetary policy of inflation".
A
policy of inflation! Yikes! What was in that
article "We're Freaking Doomed (WFD)!"?
From the perspective of the Austrian
school of economics (the only true economic
theory!), this is not going to be the ordinary
kind of inflation, either, but the really nasty,
evil kind, where "monetary policy pushes the
market rate of interest below the natural rate of
interest (the societal time-preference rate),
thereby necessarily causing malinvestment rather
than ushering in an economic recovery".
In
other words, the Fed and the government are making
it worse.
And if you want to know about
malinvestment, then ask my boss, who never tires
of telling me that I am the only employee, alone,
apparently in the whole freaking history of
employees, that has a consistent negative value to
the company, meaning that the bottom-line of the
company would be immediately improved if I was, to
coin a rhyme, removed.
So I asked her,
"What's with that 'improved if I was removed'
stuff?" to which she asked, "What are you talking
about? You are the one that said that in the
previous paragraph, you moron!" to which I asked,
"What?" and then she asked, "What?" and then we
just looked at each other, confused as hell.
There was an awkward silence, as I
struggled as if I was in some weird parallel
universe, since her point was that she is, only
now, realizing that I am, as an employee, a huge
mal-investment, but I can't be fired since I am
too old and too savvy not to sue the hell out of
all of them for my termination, even though their
case is air-tight and I should have been fired
long ago.
And, as I never cease saying,
some other, much worse mal-investments, such as
the stock market bubbles, and the bond market
bubbles, and the derivatives bubbles, and the debt
bubbles, and the housing bubbles, and the bubbles
in the sheer, staggering size of governments, were
NOT my fault, but are all the fault of the Federal
Reserve creating the money that made it all
possible
Now, as if playing right into my
hands, Mr Polleit writes, "Sooner or later the
dependence of the people on government handouts
reaches, and then surpasses, a critical level,"
which I assume we have reached.
The worse
news is that he figures that "People will then
view a monetary policy of ever-greater increases
in the money supply as being more favorable than
government defaulting on its debt, which would
wipe out any hope of receiving benefits from
government in the future."
The terrifying
point of all of this is when he writes, ominously,
"In other words, a policy of inflation, even
hyperinflation, will be seen as the policy of
lesser evil." Hyperinflation! Gaaahhh!
Hyperinflation! Immediately, I go into
We're Freaking Doomed (WFD) mode, which usually
involves a lot of hyperventilating and a feeling
of panic until I realize that all I have to do is
buy gold and silver to keep what is going to
happen to everyone else from happening to me, and
make a lot of dollars in the process, which always
makes me feel better, leading to euphoria, as in,
"Whee! This investing stuff is easy!"
Richard Daughty is general
partner and COO for Smith Consultant Group,
serving the financial and medical communities, and
the editor of The Mogambo Guru economic newsletter
- an avocational exercise to heap disrespect on
those who desperately deserve it.
(Republished with permission from The
Daily Reckoning. Copyright 2011, The Daily
Reckoning.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
