Bill Haynes and Lew Rockwell discuss why the US has avoided hyperinflation and why the dollar may long be the world’s reserve currency, despite the Fed’s promises of unlimited money creation. The Fed, as Lew notes, came into existence after major bankers met on Jekyll Island, Georgia, and formulated plans for a central bank and plans to sell the concept to Americans as means to protect them from the big banks and from inflation.
Central banks are ploys for the ruling elite classes to extract money from the people in a manner that “Not one man in a million will detect,” a statement often attributed to Vladimir Lenin. Actually, John Maynard Keynes, the great inflationist, made the statement in about 1915, and it can be found in his 1920 book The Economic Consequences of the Peace. The precise statement: “By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.”
Keynes’ positions—but especially his 1936 book The General Theory of Employment, Interest and Money—became widely accepted as the way to “run economies” and were adopted by leading Western nations after World War II. Since then, inflation has become as accepted as sunshine. Sadly, inflation has become almost as welcomed as sunshine. Shinzo Abe, Japan’s newly elected Prime Minister, is calling for unlimited money creation with the expressed goal of higher inflation (rates of price increases).
Lew noted that the rescue packages designed to bail out several struggling Eurozone countries are not really bailouts of the countries but are bailouts of the banks that hold the debt of those countries. Such bailouts are facilitated by the European Central Bank’s and the Fed’s ability to create money out of “thin air.”
With money being so easily created, and with banks being able to count on central bank relief, banks enter the world of moral hazard, where the banks make reckless loans. When the loans turn out to be repaid, the banks reap huge profits. (And, bank management reaps bonuses literally in the millions of dollars.) But, when the loans go sour, the losses are shifted to the people as central banks create money out of thin air to take the bad loans off the banks’ balance sheets. This can readily be seen by the explosion in the Fed’s balance sheet.
Bill also noted that banks, via fractional-reserve banking, are a major source of inflation.
The fifteen-minute podcast can be heard by clicking here, and it is well worth the time. Investors need to gain a better grasp of how our monetary system works, and this podcast is a good start.
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