The International Monetary Fund reports $12 trillion has been pumped into the global economy to fight the Covid 19 economic destruction. This magic money was created out of thin air like a Las Vegas magician might make a train car appear on stage out of nowhere.
Data published in October showed the Federal Reserve’s balance sheet hitting a new record high above $7 Trillion. More magic money! With magic money comes risks— big risks.
Can Printing Money Replace A Nation’s Economy?
With less production worldwide, less wealth is being created. Printing magic money and dumping it into the economy does not replace a free market economy. Maybe it will help short-term, but it comes with long-term damage to everyone and the risk of a Dollar crash.
Right now, major economies of the world are simultaneously injecting magic money—created out of thin air—into their economies. This does not make people wealthy. It makes money worth less.
When central bankers debase their nation’s currency, their citizens eventually lose purchasing power. We call that price inflation… it’s always caused by monetary inflation.
If only one nation adopts massive currency debasement, the buying power of that currency falls against Gold and falls against every other nation’s currency. (Stuff from China, Japan and Europe costs Americans more funny money.)
If all the major nations print and give away money—in this perverse experiment— no one knows the end result.
Money Needs A Stable Value
Money was first created from rare and precious Gold and Silver. The Gold and Silver ancient coins of Greek and Rome served as a stable means of exchange in trade across the Mediterranean. Real money maintained a stable value over a relatively long period of time.
The goods and services exchanged would fluctuate based on supply and demand. The money would remain stable.
In ancient times, politicians in Rome also wanted to inflate their currency. It was easy enough to do. They clipped off chunks of the edges like you see here. The result, over time, was that citizens ended up with less Gold or Silver by weight.
Rome would use the clippings to make more coins for the government to pay its debts. The clipped coins weighed less, were worth less to traders, and eventually required more coins to buy the same goods.
Politicians and bankers can get away with this magic money only for a very short time. Inflation has always been a serious problem, not a solution.
Every paper currency ever printed has become worthless— given enough time.
With an explosion of the world’s money supply, in a very short period of time, the end result of the Dollar could look more like this.