Washington, London, Zurich and Tokyo are all creating billions of their own currencies and casting
them into the financial world, and there is no sign this flood will be stopping soon. What happens to all
of this money? One would think this profligacy would lead to inflation. Certainly there are analyses that
Bernanke’s excess billions have driven up the equity markets and commodity prices, but the argument
is also persuasively made that none of this money has reached Main Street, or at least not much of it.
The recent data hint that bank lending has modestly increased, but most of this is directed toward the
strongest corporate and consumer borrowers. The small businessman and the bottom 95% of
consumers are out in the cold. Why hasn’t all this money given us the kind of inflation that Zimbabwe or
the Weimar Republic experienced?
The simple answer is because the banks have all the money. We poor mortals have gotten none of it,
and if we don’t have it we can’t spend it, creating the excess demand that would cause inflation.
Because excessive debt built up during
the good times must be paid back, investors are forced to sell assets and drive down financial markets.
The liquidation even hits 'safe' investments like gold. Until the debts are paid back or written off, the
economy must suffer through stagnant periods with no inflation. In the current political climate
“helicopter Ben” won’t be able to release his dollars until it is clear to all that the economy is back in
recession. However, this is a foregone conclusion as further austerity seems to be in America's future.
No comments:
Post a Comment