Monday, October 11, 2010

The Fed's Magic Money-Making Machine

Once again Matt Taibi shows why I wish I could manage to get his blog working in the blog list along side here. Does this worry you? Should it? Do you seriously think Republicans will handle it differently than Democrats?  If I am wrong to be concerned, explain to me why.

Oh I know. It'll help our economy. Does it dawn on those claiming that, when a trillion dollars is printed with nothing behind it, that's why bread costs more in the grocery store? And with this kind of manipulative thinking, guess what, Social Security payments won't go up at all because the guys that calculate that say there is no inflation. Nope, none at all... unless, of course, you want to eat, pay rent, heat your house, have a phone, fuel your car, insure anything, but hey as long as you what you need is a new DVD, you're in good shape...

You cannot print dollars out of thin air and not have it impact the value of the dollars already there, can you? I am no major in economics, but this just doesn't make sense to me. Can anyone tell me why it should?

Why aren't more reporters covering this stuff?


Parapluie said...

Matt Taibi has some iteresting perspectives but I would like to make my own mind up about the names he drops with abusive commentary.

Rain said...

I must have missed the names because my only concern was the Fed printing $1 trillion out of air. That's the question. Forget who did it but rather concentrate on did it happen? Why doesn't the regular media discuss this if it did? Don't you see this is how governments cover debt all right but it makes the currency lose value when it is printed with no basis behind it just to cover debt. So the issue here is did it happen?

Rain said...

For anyone who understands economics better than I do, check out this article on QE2-- Experts warn that further easing could sink recovery.

The thing is what I know is that some countries have ended up with needing to carry their money in wheelbarrows to pay for anything. Obviously that's not necessary in an economy like ours where money rarely actually exchanges hands to pay bills; but the reality is that if the fed can just print money to pay debts or whatever, doesn't that reduce the value of current dollars or do I just not get it?

Robert the Skeptic said...

Former banker talking here - many people express concern about printing money (a euphemism for increasing the money supply) with "nothing to back it". The implication is that there should be $1 worth of gold/silver for each $1 in paper money.

The problem with this is that there is a fixed amount of gold/silver. As the population rises, that means there is less per person to go around. Now this is a simplistic explanation, but in general it means that the money supply needs to be fluid to accommodate growth.

A certain amount of inflation is a good thing; it is part of economic growth. Too much or too little is the balancing act that policy analysts walk.

As much as I would have liked it, SS benefits did not receive a cost of living increase BECAUSE the Consumer Price Index is down but also because those increases would have increased inflation.

Now at this point my grasp of economics gets pretty hazy. When this happens I fall back on a quote from a news reporter who once said: "If you take all the economists in the world and placed them end-to-end, they would all point in different directions."

Rain said...

I understood that part but what got me is they suddenly decide to buy up a bunch of mortgages; so they print money to do it, not through taxes or fees but just what the heck, let's print some up and then they do it again. Won't that impact the value of the dollar? It's an easy way to cover a debt if you just print up money with no basis in GDP or anything behind it. And the fed is not under our control or even our ability to check once its director is appointed and affirmed. A trillion added in the spring, another in November, what does that do to the value of our dollars? and that means to what we have to spend to buy necessities. Their method of determining inflation has been phony for a long time.

Ingineer66 said...

Hey Robert, we can agree on one thing. I like your quote about economists. And Rain, I agree with you about printing a bunch more money. It is going to make the dollar worth less against foreign currency so that will mean that everything will cost more. And it will also mess up the oil markets, so oil will cost more, so that will again make everything else cost even more. Maybe when a loaf of bread costs $10 people will realize that printing money and spending it in the name of trying to spread the wealth around wasn't such a good idea.