Print more money? What am I missing?

[Scuba]

When the average American is living payday-to-payday (if lucky) while the wealthiest are worth multiple Billions, guess who is benefited most from inflation?

If gas goes to $5, most Americans will suffer greatly. If you have a few billion, you won't notice.

Spend $300 dollar a week on groceries for a family of three? Many will starve. Literally. But those that are currently spending millions on birthday parties won't even notice.



Wall Street give out $144 Billion in bonuses in 2009. Social Security recipients are without a raise, again.


(edited for spelling)

[notesdev]

1. Who do you think the Federal Reserve works for?

While it poses as a government agency, the reality is that our money supply is controlled by a banking cartel (which is exactly what the Federal Reserve is - its owners are a small group of extremely large banks like Citi, BofA, JPM, GS, etc.)

So when Bernanke goes forth with QE2 he is working for the banks, not for you and me. He doesn't give a squat what happens to you and me as long as these banks survive, because that's who he works for.

When you're sick of having our money supply controlled by a force that is immune to our influence and whose interests conflict wildly with our own, hop on board - the anti-Fed campaign is alive and well, and growing as more and more people understand how money in this country actually works.

[Scuba]

3. Thanks for helping educate me.

[ixion]

5. exactly...

well said.

[Statistical]

8. Meh you economic theory is flawed.

Banks are the ones who suffer the most under high inflation.

A lender gives you today money and is paid back with future dollars.

Inflation is simply a method of saying future dollars are worth less (not worthless but worth less). 10% inflation means next years dollars are worth $0.90 compared to today's dollars.

Thus bank is lending out valuable current year dollars and getting paid back w/ increasingly less valuable future year dollars.

Inflation benefits debtors at the expense of everyone else.

[notesdev]

12. In general yes, in the current situation no

Banks aren't going to get paid back at all on a great many deals under the current deflationary conditions.

Trillions of bailout + enough inflation that people can actually pay the banks again is the ideal sweet spot for the bankers right now.

If people default their way out of debt, these are not future good customers for the banks. They want people who are constantly giving them money, both defaults and people who can't to take on debt are things that are not good for them. What would be especially bad for them is large masses of people learning that they don't actually need debt.

[Xicano]

16. Statistical I have to disagree because banks lend out money created from thin air.

Banks operate on a system called "fractional reserve banking" where the bank only has to have on deposit a fraction of what they are allowed to lend out - I believe around 10 to 1. So banks are not earning 8% interest on their loans, they are earning 80% interest by inflating the money supply, devaluing our currency resulting in transferring wealth from the masses to them the banks. Approx 95% of monetary inflation is created by fractional reserve banking.

Another way the banks are not suffering from inflation is simply because of the fact that wealth (the goods and services produced) is never destroyed, rather, instead, wealth is merely transferred. Inflation is a tool which (among other things) transfers wealth and banks sit in the best position to benefit from this.

So to the folks on wall street it doesn't really matter if the masses can't afford to spend the way they use to because the currency isn't the wealth, what is produced by labor is the real wealth and these folks are still receiving that production whether it was made here or in some poor country, and, we the masses have less of that wealth because of these money manipulations.

There are two excellent videos out there on this subject I would recommend. The best one of the two happens to be very long (3½ hrs) but is very informitive. The videos are called "Money Masters" & "Money as Debt" Both of these videos provide excellent information on this subject. I would recommend these videos to anyone interested in this subject.

[SlipperySlope]

17. Meh your economic theory is flawed.

Yes, creditors (banks) generally do poorly under high inflation.

But that isn't the case if the excess money being printed is given directly to the banks.

When Ben prints up his next trillion and hands it to the big banks, it is you are me who will suffer most. The bank doesn't really care if it gets X debt paid with dollars that are only worth 0.9X, when it also got X dollars on the side.

[Statistical]

19. Ben doesn't GIVE money to the banks. He lends it to the banks.

The fed controls the supply of money by changing the cost of money. interest is the cost of money and right now banks can obtain money very cheaply. However that will change in the future. The fed funds rate will rise and carrying cost of that "free money" will also become a real drain on banks profitability.

[doc03]

2. You have one party that says "no" to everything

but a tax cut you have to print money, so we all will pay with higher prices.

[unblock]

4. inflation benefits mostly debtors, such as middle-class homeowners

who have a house that will inflate in value against a mortgage that will not.

rich people, who have wealth, generally HATE inflation because it erodes the value of their wealth. although some of their wealth does inflate, it's usually not enough to cover the negative effects. certainly any savings and lending they've done are seriously eroded.

rich people and pensioners in fixed incomes are the ones most harmed by inflation; most others are neutral or even prefer it. paycheck-to-paycheck workers (no debt, no savings) are temporarily harmed because wages usually inflate along with prices, albeit with a bit of a time lag.

[ashling]

6. Have you no compassion?

Have you checked the price of fois gras and caviar recently? A magnum of Dom Perinon? :sarcasm:

[Statistical]

7. Inflation is an equal oppertunity killer.

A billion is only worth a billion today. Say you get 10% inflation. Next year that billion has only $900 M in buying power. While that isn't going to prevent billionaire from paying the bills it does represent $100M in wealth destruction.

Although the nominal value won't change the "real" or purchase power will.

If you think rich benefit from inflation then you are misinformed. Nobody wants inflation except debtors.

The only people who benefit from inflation are those in debt. The single largest source of individual debt is mortgages

In a perfect world you would have neither inflation nor deflation but given that is virtually impossible to achieve normally the FED attempts to maintain price stability via low consistent and predictable inflation. The recession has forced FED to take the very risk posistion of forcing inflation to jumpstart economic activity.

[Scuba]

9. OK, unblock and statistical have given me more to think about...

...to summarize, my mortgage in effect becomes cheaper but at the same time my savings are worth less.


Still, the wealthiest won't feel any pain.

A paradox.

[Statistical]

14. Short term a modest amount (3%-4%) of inflation is actually desirable.

I won't bore you with the reason but they deal w/ stimulating demand and forcing banks out of treasuries.

Also you are right your mortgage is a huge hedge against inflation (and for most people is a significant fraction of their income). You can partially shield your retirement by moving into inflation protected assets (TIPS, gold, commodities, stocks that deal w/ commities like miners, agro companies, etc).

Still longer term inflation is a robber of wealth. It doesn't matter if you are a hundredaire, thousandaire, millionaire, or billionaire.

[hfojvt]

10. you are missing the fact that inflation also increases wages

as I concluded from studying the 1980s

"Ironically enough I think the 6% and 11% and 9% inflation rates give Reagan an advantage. People have the perception that things are getting better when they can see themselves making more money. A 10% inlfation rate turns $10,000 into $11,000 and to an average worker it looks like they are making an extra $1,000.

So, to summarize the history.
1. The Carter years were better than the Reagan years
2. It took 5 years for unemployment to recover after the Reagan stimulus

This study also leads me to a suggestion. Why not print more money? It seems to me that would have a triple advantage. Print something like $300 billion and that would do three things.
1. It would stave off deflation and create some inflation (and rising wages would make people feel better)
2. it would stimulate the economy
3. it would reduce the deficit without raising taxes"

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=389&topic_id=9192413

If you believe Krugman, our current concern should be deflation and the US economy runs better with 3-4% inflation.

[doc03]

15. No it doesn't, it doesn't increase buying power the middle

class buying power has been dropping for decades. Very few people get a COLA from their employers today. What good does it do if your wages increase 1% and the inflation is 3%?

[girl gone mad]

11. The money should be printed and put into the economy..

through jobs programs. Skip the middle men - M3 is irreparably broken. QE is and will continue to be an exercise in futility.

Banks aren't really in the business of lending anymore, despite what you may have been told. They exist to make money for their shareholders and executives. They are quite capable of making money in an inflationary environment, a deflationary environment, a stagflationary environment and probably a hyperinflationary environment, too.

[BzaDem]

13. Bernanke is doing exactly what is necessary. In this economy, inflation means higher demand,

which is essential. Inflation also means lowering peoples' debt loads, which would also be very good for the economy.

[scheming daemons]

18. At the moment, we risk DEFLATION... which is 10 times worse than inflation

We need to avoid DEFLATION at all costs.