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I was stunned to learn that Stephen Harper is defending the insane policy of Fed Chairman Ben Bernanke. The rest of the G20 are outraged by the US plan to save the economy by magically creating money out of thin air, and they should be outraged. The collapse of the American dollar will hurt not just the American economy but the Global economy as well.
The thing I find so confusing about Mr. Bernanke’s plan is that the flaw is so obvious and so simply that I cannot understand why he fails to grasp it. You create more money that money is worth less. This is basic supply and demand economics that I learned in high school.
Actually I learned about the danger of magically duplicating money even before high school. I was taught by my favourite economics teacher: Scrooge McDuck.
The young and foolish nephews of Scrooge have gotten a hold of one of Gyro’s inventions. The gizmo can duplicate anything that you point it at, and of course money is an obvious thing to duplicate.
If you skip ahead to 2:48 in the following video you can see Scrooge explaining to his nephews why this is a bad idea:
So if as a child I was capable of understanding why magically duplicated money is a bad thing, why can’t Stephen Harper and Ben Bernanke?
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5 comments:
Harper said it was good in the short term.
Not that I am defending Harper (I've giving up on that) but I think Canada's current interests are better served by supporting the US until we better diversity our export economy.
Seriously, between siding with Germany and China vs siding with the US, I would always side with the US, however misguided its policies are.
China is po's because it will drive the dollar down.
But they refuse to let their currency float.
anon 1,
I'm not even sure that it is beneficial for short term gain, but in the long term it is a disaster. I can understand why politicians have to think in the short term but the Fed Governor has no excuse.
Mlkhael,
Canada's interests are not served by blindly supporting whatever the US does.
Anon 2,
China's currency went up by 21% between 2002 and 2007. The trade defecit increased at the same time. So you shouldn't exegerate the importance of allowing the Yen to float. (though I agree that they should)
It is quite simple really. They have no choice. If they do not do QE2 they will have an immediate deflationary depression. If they do they may be able to extend the whole house of cards a little longer but will given enough time and printed money end up with a hyper inflationary depression.
Extend and pretend forever because it is a mathematical impossibility to pay off the debt.
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