Wednesday, July 27, 2011

Coming Soon: The One Hundred Trillion Dollar Federal Reserve Note

This is a one hundred trillion dollar Federal Reserve Note.  (It's from the Zimbabwe printing press, not the Bernanke Publishing Company.) 

No one in Zimbabwe thought they would ever hold one of these. 

The people who inflated Zimbabwe's currency to the point of uselessness claimed to be doing so for the good of The People. 

This piece of paper isn't linked to anything of value, just like the U.S. currency isn't linked to anything of value. 

Printing one hundred trillion-dollar banknotes creates massive problems for the general populace, but it solves problems for the elite few who run the government printing presses.  Therefore, the elite few are going to run the shit out of the government printing presses. 

Like Zimbabwe, the U.S. has very few safeguards in place to prevent someone from printing all the money they think we need, and using it to pay their buddies for stimulus packages, TARP plans, deficit non-reduction schemes, and the like. 

It will happen here.  Hide and watch. 


Hot Sam said...

I agree with your statement that inflation is a real possibility here in the US. I think it's doubtful it will explode into hyperinflation.

It's not true to say our currency is not backed by things of value. The assets on bank balance sheets are valuable and carry a variety of risks to their value. those risks are measured and are included in regulatory capital requirements.

Gold also has risks to it's value. A cursory look at gold prices will demonstrate that gold prices have been volatile. Monetary systems based on gold are cramped in their ability to expand and contract along with money demand. This is why we abandoned the inefficient gold standard.

We are not seeing inflation now because the vast increase in reserves has not translated into money creating loans. Businesses are still too cautious about an economic downturn or do not see a sufficient return of their demand.

I share your view that we have allowed too much leveraged growth, and that tinkering with monetary policy has done little good with tremendous risks. Politicians, elected and unelected, are desperately seeking solutions to save the day. It doesn't occur to them to do nothing or to withdraw from influence.

But take heart in the fact that all sides of the political debate in DC are preaching austerity, and there is resistance to continued misadventures in monetary policy. Those efforts may be half hearted, but it's moving in the right direction. We can't expect more with divided government.

TarrantLibertyGuy said...

Wow Nick. We MAY see inflation? Since the Federal Reserve was created, we've lost over 98% of the value of our dollar. The assets backing the accounts payabl on the bank's balance sheet is the asset you think is a good backing for the dollar?

With fractional reserve banking in place, this is a sliver of what is needed to provide "backing". It is a house of cards. Credit cards.

And you may want to stop thinking in terms of the gold rising and falling vs the dollar. Gold's purchasing power has remained fairly constant since 1916. Look at a gold price chart from 1920 - today. Now, turn it upside down. Now, it's a dollar value chart.