Consumer Price Inflation Under a Fiat Monetary System is the Direct Result of Bad Economic Policies By Politicians – Central Banks in Western Nations DO NOT PRINT MONEY – February 25, 2022,
First and foremost, in the long run, I’m bullish on Gold and Silver, in fact, I could argue I might be bullish on Gold and Silver in the short term, at any time, the fiat monetary system enjoyed by GOVERNMENTS today could end. I’m not really a fan of Bitcoin, but I like what’s happening in cryptocurrencies because it’s a reminder that the private sector can create money people are willing to use.
The world doesn’t need the government to create money, now it’s not to say that there wouldn’t or shouldn’t be an option for people to use government approved money, some people feel more assured that their money is safe or insured when it has the approval of their government. But it should be noted that humans don’t need government money, once you understand this, you’ll better appreciate the Federal Reserve model of “central” banking.
The Federal Reserve doesn’t print money, you’re hearing more and more people talking about Central Bank Digital Currencies(CBDCs) which could be the future, I don’t know, but as of today’s date, the Federal Reserve doesn’t PRINT money, it merely sets the conditions that allow the U.S government to print money.
To preserve the integrity of the U.S dollar, the U.S government BORROWS money into existence, as does the private sector, the reason these entities BORROW money as opposed to print money, is that there’s a bank ledger if money is merely printed, there’s no point in having a bank ledger, furthermore simply printing money in the manner money is printed in Venezuela or Cuba equates to hyperinflation, because the IMMEDIATE problem with PRINTING money is an IMMEDIATE misallocation of resources.
There are costs of doing business and one of the reasons, governments in western nations, regulate entire industries out of existence, is because governments get preferential treatment from their central banks. So let’s say I’m a politician, who wants to kill the fossil fuel industry, instead of nationalizing the industry, which would lead to immediate chaos, I might decide to create some sort of incentive scheme, which would force privately-owned energy companies to hire lobbyists, lawyers, and accountants to LEGALLY pay to play in the heavily regulated fossil-fueled economy.
In the tobacco industry as an example, only the well connected, and well-financed were able to survive government regulations, because the government prints money, a lot o private companies, don’t bother fighting government regulations. If you read Atlas Shrugged, you’ll notice the odd behaviors different business people had towards the tyrannical government.
Well, the reason, a lot of private companies are so subservient to the government first and foremost has to do with their FIDUCIARY duty to their shareholders and also the reality that the Government has the ability to print money. Many of us witnessed former President Donald Trump publically telling the Federal Reserve that he’d like them to lower interest rates.
In history, Ronald Reagan and Paul Volker were the only instances in which the sitting president and the Central Banks appeared to be separate entities. Although Joe Biden has okayed Jerome Powell to do whatever he wants, Fed Chair Jerome Powell in the face of inflation is terrified to normalize interest rates, why? Because he’s clearly scared of something?
Why is Jerome Powell scared to raise interest rates if the Federal Reserve doesn’t print money? One could summarize that the Federal Reserve is now a political institution, which is why in my opinion more and more people are using the term “Money Printing” if you believe the Federal Reserve is printing money, it will be difficult for you to interpret current Gold Prices.
There have been people who think that 1 ounce of Gold should be at $10,000 USD. Why do some people believe that? It’s because they don’t imagine the U.S to be in debt, instead, they imagine that the Federal Reserve an extension of the U.S government is printing money. I like to remind readers that government spending should be called “government investing”. Ofcourse I’m against government investing, but let’s not forget that some people imagine that by delegating certain tasks to the government, society as a whole will be better.
Now, ofcourse I know better than to think something so ridiculous as the government being efficient with scarce resources, but people who do believe in that nonsense, have a strong voice in world. Once you understand that the Central bank doesn’t print money, it’s easier for you to understand that consumer price inflation comes from bad economic policies from the government.
It now costs more fiat dollars to buy fewer gallons of gas, why? Because as an example western leaders have regulated the oil and gas industry, making it less competitive. If oil and gas companies want to participate in this new oil and gas economy, they have adhered to the new government regulations, these government regulations are intentionally making it more expensive for oil and gas companies to compete.
These oil and gas companies then pass those additional costs onto consumers, who the government hopes will reconsider purchasing any equipment which includes things like plastics that are derived from oil. Now, if the federal reserve was printing money, what would happen is that more people would become consciously aware that they’re being rewarded for doing NOTHING!
I often try to explain to people that they should do charity work at least once in their lifetime in a third-world nation. Because what you’ll soon figure out, is that global poverty revolves around a government’s regulatory policies. In Africa and Latin America, it’s common for the ruling political party and their goons to nationalize private property generating income or extort private businesses making an income, now it’s one thing to extort private industry after a country has been developed, it’s something else to do it when a country is still a third world nation.
Regarding America, government borrowing money has led to an acceleration of poverty, most observers, don’t think of the government borrowing money, because the Federal Reserve is reluctant to change its low-interest-rate policies and these people will often use the term printing money, which is fine for convenience sakes, but it could equate to horrible investment advice.
If people think the Federal Reserve is Printing money, they might misinterpret gold prices. Gold prices are where they are, because there are people who think interest rates will eventually return to normal and others who believe that interest rates CAN’T return to normal. Where I am in all of this, is I’m buying gold and silver whenever I feel like it. I don’t play the forex markets and I don’t play the Gold markets. But I refuse to promote the idea that Government is printing money.
If CBDCs become a reality and private banks which are the most responsible for currency creation are dissolved, then I’d be on board with the money printing crowd. Whenever I hear anyone describing CBDCs they present their argument as if technology will allow the central banks to manage pricing signals, which in my opinion sounds ridiculous, Bitcoin is having a very difficult time with pricing signals, it’s one of the reasons why most people don’t use Bitcoin to buy stuff. Most people use Bitcoin to sell for fiat money at a later date, why? Because Bitcoin sends all sorts of incorrect pricing signals.
I think CBDCs would be a disaster for pricing signals. Imagine some central bank deciding wages? or the prices for things, imagine being a business person when the central bank and the political elites are merged. Politicians, who already create economic havoc now, then having the ability to destroy your business, because based on their data, your prices are too high?
Because the government under a CBDCs system would be rewarding people not to work hard and innovate, similar to what happens when there’s a labor union in a private company, employees will opt to be as unproductive as they’re allowed to be in order not to be screwed over by the CBDCs system. I bring this up because Western governments when designing their central banking system wanted to make their central banking system decentralized.
Many of us are familiar with the Euro-dollar system, currently, there are more Euro-dollars in circulation than there are domestic U.S dollars, and these Eurodollars weren’t printed by the Federal Reserve. Once you understand the Eurodollar system, you comprehend why the U.S dollar at times will rise no matter how bad the U.S economy is doing.
Interesting times ahead!