From Balkinization, the website of Jack M. Balkin:
....if President Obama had showed up at the press conference immediately following the elections and announced that regardless of the results of the elections, he was proposing a new 600 billion dollar stimulus plan, and that he expected Congress to pass it immediately, reporters would have thought he was delusional.
Now imagine that President Obama said: "And if Congress doesn't act immediately to pass my 600 billion dollar stimulus package, I'll simply enact it myself without Congress." Reporters would have thought he was doubly delusional. And a dictator to boot!
Now imagine that President Obama also said: "And, you know what, I'm going to structure my new 600 billion dollar stimulus by giving the banks windfall profits. That's right, the very same banks that got those lovely bailouts before!" The Republicans' heads would explode!
So what exactly did Fed Chairman Ben Bernanke do on that very same Wednesday? He ordered the Fed to purchase 600 billion dollars of United States bonds. Who owns those bonds? Well, um, banks, investment banks, brokerage houses and other financial institutions; you know, many of the same players who got those lovely bailouts that the voters hated so much. And by purchasing 600 billion dollars in bonds in a relatively short period of time, he is effectively driving up their price, thereby giving a windfall to their owners. (Even better: many of the owners are in foreign countries-- so it's effectively a bailout for foreign banks too! I'm sure the voters will love that.)
And he can do all this without asking Congress's permission. Why? Because he's Ben Freaking Bernanke, the chairman of the Federal Reserve, that's who.
If you've made it this far, I can predict that your eyelids are getting heavy. This isn't as interesting as ObamaCare, Abortion, Gun Control, Gay Marriage, or even NAFTA, is it?
Our leaders are happiest when you're wondering if Christine O'Donnell is a witch, if Rand Paul worships Aqua Buddha, or if Barack Obama wants to take away your Bible.
The Federal Reserve is about to create $600 billion dollars from someplace, probably that big printing press they have on Blue Mound Road in Fort Worth, Texas.
If there are 300 million Americans, that means that your share of the cash in the U.S. is about to be worth $2000 less than it was before this announcement.
Here's Ron Paul on the subject. This is from his book The Revolution: A Manifesto.
When the Fed intervenes like this, increasing the money supply with money and credit it creates out of thin air, it causes all kinds of economic problems. It decreases the value of the dollar, thereby making people poorer. and in the long run even the apparent stimulus to the economy that comes from all the additional borrowing and spending turns out to be harmful as well, for this phony prosperity actually sows the seeds for hard times and recession down the road.
First, consider the effects of inflation, by which we mean the Fed's increase in the supply of money, on the value of the dollar. By increasing the supply of money, the Federal Reserve lowers the value of every dollar that exists.
(That's why the government is trying to get you out of dollars, and into purchases of things they want you to buy. Like purchasing all the houses that they're stuck with from their Community Reinvestment Act/Fannie/Freddie real estate debacle, or purchasing cars and trucks from those new auto companies they acquired. They are honest to God trying to get you to spend money by announcing that your money will soon be worth less. Those who know how the system works have responded appropriately. Notice the recent stock jump?)
If the supply of Mickey Mantle baseball cards were suddenly to increase a millionfold, each individual card would become almost valueless. The same principle applies to money: the more the Fed creates, the less value each individual monetary unit possesses. When the money supply is increased, prices rise - with each dollar now worth less than before, it can purchase fewer goods than it could in the past. Or imagine an art auction in which bidders are each given an additional million dollars. Would we not expect bids to go up? The market works the same way, except in a free market there are numerous sellers instead of the one seller in an auction.
All right, some may say, prices may indeed rise, but so do wages and salaries, and therefore inflation causes no real problems on net.
This misconception overlooks one of the most insidious and immoral effects of inflation: its redistribution of wealth from the poor and middle class to the politically well connected. The price increases that take place as a result of inflation do not occur all at once and to the same degree. Those who receive the new money first receive it before prices have yet risen. They enjoy a windfall. Meanwhile, as they spend the new money, and the next wave of recipients spend it, and so on, prices begin to rise throughout the economy - well before the new money has trickled down to most people.
These are known as the distribution effects, or Cantillon effects, of inflation, after economist Richard Cantillon. The average person is silently robbed through this invisible means and usually doesn't understand what exactly is happening to him.
And almost no one in the political establishment has an incentive to tell him.
Pics came from here and here and here.