Ben Bernanke before the National Economists Club in 2002, we’re concerned that our current Federal Reserve Chairman might be operating under the burden of a non-lethal brain blockage. At least that’s the only conclusion we at the American Monetary Association can reach after reading the following excerpt from his speech.
?Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.?
If we’re reading this correctly, Mr. Bernanke is bragging about the United States government’s capacity to drive down the value of our currency and artificially inflate the price of goods and services via an unlimited capacity to print money, but we know exactly which primrose-lined-with-grenades path that leads us down, right? Tinkering with such a basic component of our economy as the national currency is something akin to tying a couple of raw steaks around your neck and taking a refreshing swim with the friendly neighborhood sharks.
Yes, printing a new batch of money to send into circulation will undoubtedly allow all of us to wake up the next morning with more money in our wallet which, as an unfortunate side effect, is worth less than it used to be. So we head out on our predictable spending sprees, pay some debt, buy some stock, put the new money into circulation. Keep in mind that your income stays exactly the same. As demand rises for products, store owners begin to see shortages on the horizon and follow the law of supply and demand as capitalists have forever ? they raise prices. Within the span of a few months, the nation faces the prospect of higher prices at the store on the exact same salary paid in a further devalued currency, and now you can’t even afford the products you used to buy before Mr. Bernanke’s magical printing press went on a spasmodic rampage.
This is why we suspect the Federal Reserve Chairman might be suffering from a brain blockage. Nothing critical, mind you, but it does seem to be affecting the logic center and impairing the free flow of information therein. If this continues, good luck, America. We’re going to need it.
The American Monetary Association Team
Flickr / Gage Skidmore