Dr. Paul Hein
The headline in the Wall Street Journal read: “Fed Weighs More Stimulus.” I was caught by the indecisiveness of it. The Fed is “weighing.” I guess that has a better ring to it than “guessing,” or “flipping a coin.”
The first paragraph of the article said that Fed officials (anonymous) sent “new signals” that they were “considering” actions to “bolster the economic recovery” but disappointed many by “not indicating they are committed to taking action.” In other words, full of sound and fury, signifying nothing. Well, almost nothing. The words intended to catch the reader’s eye are “bolster the economic recovery.”
It helps to know what the “economy” is. You can refer to a dictionary, of course, and get an answer that would satisfy the professor in an examination.
Or you can immerse yourself in reality. What is happening to prices in the supermarket? Are there many empty stores in the local mall? How readily are homes selling in your neighborhood? What is the unemployment rate? You could form the opinion, from these observations, that the economy is the total buying, selling, producing and savings of the people.
What can the Fed do to influence these things? Let’s take a look: it can create more money. Actually, that should be “money,” because money, as a tangible substance exchanged for goods and services, hasn’t existed in this country for nearly half a century. But the Fed, and the banking system in general, can — and do — create credit, or checkbook money, by making loans. The borrower gets nothing from the bank (money is no thing) but only a number added to his account. The banker gets this number where everybody gets numbers: he simply writes it down. When a banker does that, it’s money. When you or I do it, it’s just a number.
The Fed can also, indirectly, through its wholly-owned subsidiary, the United States, increase taxes, a move that we’ve been assured is inevitable. And that’s about it. Neither the Fed or the U.S. produces anything. It provides no useful service that people would seek voluntarily (if it were provided voluntarily!). In other words, our rulers can only pump new money into the system with one hand, and flush it out again with the other. Those most highly favored by the rulers will get the money first; those less organized, and with less political clout, may get their hands on it later, when its buying power has diminished.
In the same edition of the Wall Street Journal, another journalist admits there is “mounting evidence that the U.S. recovery has slowed.” This is hard to reconcile with the “economic recovery” mentioned in the first story, but I guess economics, as the dismal science, can’t be expected to be consistent. No matter: both authors agree that the Fed can do something about the economy, whether moving hesitantly forward, or inching backward. And what can do it?
IOUs are firm foundation of national economy
The idea is very simple: pour money into the system, and people will buy things, and this will stimulate employment, and, lo!, the economy will spiral upward and happy days will be here again. Yes, the rich will probably get richer, but it can be taxed away from them — the greedy, selfish so-and-sos!
Except: the Rulers have been doing this for several years now, and it hasn’t worked. Easy credit may indeed bring a flush of new activity to the marketplace, but what then? When the new money has worked its way through the economy, will things be better? Putting money in people’s pockets may trigger a rush of buying, but buying what? Are businesses going to expand when they suspect the new-found demand is artificial — based on handouts which may not continue?
Are they going to borrow more to expand their facilities when they are already stretched to their credit limit? Will they hire new workers in such a situation, especially given the anti-business climate that prevails in Washington? And you can tax the “rich” only so much. We’re already reading of an exodus from this country by people fed up with being plundered by politicians anxious to buy votes with other people’s money.
Whatever the Fed does is almost certainly going to make the situation worse. New money equals new debt. We are already awash with debt, and still haven’t learned that you can’t borrow your way out of it.
Simple moral issue underlies befuddling technicalities of loan business
But look beyond economics.
Is it right for banks to create from thin air the “money” that you and I must work for? If counterfeiting is a form of theft, does making it official make it any less wrong? When Al Capone took “protection” money from his victims in Chicago to provide for himself and his gang, did anyone think him justified? How is it different when our Rulers in Washington, or the State House, finance grandiose schemes with other people’s money, taken from them by force, or the threat of it?
The stimulus, after all, can only come from the printing press (counterfeiting) or taking it from others without their consent (theft). Which poison do you prefer?
Perhaps the biggest bubble confronting us today is that of ever-expanding government, financed by a banking cartel that thinks it can solve every problem with more money, created out of nothing. When that bubble explodes, and it will, the noise will be heard round the world.
All the more opportunities for local economy.
Dr. Paul Hein, a retired ophthalmologist who lives in Ballwin, Mo., has always had the keenest eye for the misdoings of our betters on a fundamental point of economics. That is, their printing of unbacked paper notes that pretend to be lawful, valuable dollars and which promise nothing except the ruin of the federal republic. Dr. Hein is the author of a favorite book about economics, All Work and No Pay; Life Saving Lessons in Modern Money (1986), from which this essay is adapted, and was president of the Monetary Realist Society. He is married and father of four children.