Fed dillutes money some more

March 11, 2008 at 12:32 pm (Inflation)

It’s a simple concept, but somehow it still isn’t understood by most people.  Dollar bills are a good, just like Crunchberries are a good.  If it rained Crunchberries from the sky every day at 11:03 AM, no one would ever be able to sell Crunchberries and stores would stop carrying it.  In other words, the more Crunchberries there are, the less each Crunchberry is worth.  Supply and demand.

So it is with dollars.  The more total dollars there are, the less your dollars are worth.  So, when the Fed announces it’s going to further dillute your dollars by printing up 200 billion more, it’s bad news, not good news.

But the media can spin things in 180 degrees of course.  This will increase liquidity!  Banks can now make more loans!  Great!  So, let’s see… banks who deserve to take a loss for their shady loan practices instead get bailed out by the government.  And corporations that have mega-assets will continue to make a return on their investments, and the only catch is that those with modest means foolish enough to have saved money in a bank account will note their dollar doesn’t go so far this year.

What a relief the Federal Reserve acted!  Way to go!  I was afraid Wall Street wasn’t going to continue making obscene profits at the expense of the little people, but that fear is allayed.  This graph from ShadowStats.com shows the rate at which the Fed has been printing up money lately, just in case you’re wondering why everything you buy is so expensive:

sgs-m3.gif

Hey, I have an idea.  Since we have a 10 trillion dollar deficit, let’s just print up 10 trillion dollars to cover it, and then we’ll have paid off our debt at no cost!

Today’s article of doom: people starting to walk away from mortgages in droves.

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