Printing Dollars Brings U.S. An Inflation Problem

By Michael McCune

That click, click click you heard Wednesday wasn’t coming from the rapidly climbing stock market, it was the echo from the Federal Reserve’s printing press. The markets took off because all of their worries were removed when Ben (BS) Bernanke, took us where no man has ever gone before. Bernanke has decided the United States will be the lender of record for the entire world’s economy. Yes, Keynesian policies have been formally adopted by BS–and Americans will pay dearly for the privilege of helping others with their money problems. After WWII, John Maynard Keynes campaigned adamantly for a global currency administered by a global bank. It was, he argued, the only way to solve currency disputes. The idea didn’t fly but the institutions to administer such a system were created, specifically the International Monetary Fund and the World Bank. These bastions of a One World Government have been nothing but welfare providers for developing nations as the individual nations stubbornly clung to their sovereign authority. Keynes dream lived on however, particularly in crowded Europe and America’s higher education system. President Nixon’s repudiation of the gold standard was the first step towards American insolvency and Keynesian policy; the creation of the Euro and a continent-wide central bank was another. Each time there has been an economic crisis, it has provided central bankers with an excuse to take another step towards Keynes’ dream. Since 2008, BS has stood alone among world bankers in embracing mind-boggling inflationary measures without a wince. His own reports have shown there is “minimal inflation” in the U.S. Undeterred by real facts, BS has revealed himself to be a true Keynesian with unlimited faith in the healing power of worthless paper money for all the world’s problems. His stance has a warped logic. If America is going to be the world’s empire, with the belief nothing in the world can’t come under your political microscope, it bears certain responsibilities as well. America has to be the policeman for the world, it has to provide aid for the world. It also has to step to the plate when the debt-addicted global economy needs a guarantee for that debt and provide the necessary liquidity to ease the tough times. What BS fails to recognize is this can backfire immediately with a global inflationary crisis followed by the final breakdown of the “intertwined” markets. BS blithely assures us the opposite stating, “There is no exchange risk in such actions.” That is false. If the U.S. gives $100 billion to ECB for $100 billion worth of euros at the exchange rate and the ECB lends the dollars to private banks there, the euro’s value against the dollar nose-dives and the ECB cannot then gain more dollars to repay the Fed who should no longer accept the worthless euro. So the underlying debt problem hasn’t been solved, merely transferred to another currency. This is the dilemma, no matter what the world’s bankers do the whole system eventually disintegrates from debt. In a world of rapid exchange of information, this can happen suddenly. Only 36 hours after the Europe credit began failing, BS stepped into the void. He is now not running the printing press for America but the whole world. But when a stumbling economy is hit with 17-20% inflation, necessary to cover the newly-printed dollars, what happens? In Nome, Alaska, the recent savage winter storm halted one fuel shipment. The price of fuel shot to $9 a gallon in one day. If the next shipment can’t get through by sea, the more costly use of air transport will be used and the price could go to $20. But that option is limited. Alaskans are finding out fiat is no good when it can’t buy the necessary energy to sustain life in the frozen north. The whole intertwined global economy is in the same boat. BS did not solve the problem of a debt-fueled economy, he’s merely masked the problem by hiding it behind a false optimism. Debt, like a hungry wolf, doesn’t go away. It merely seeks a weak spot to attack. Our economy is weak, inflation at this time will be lethal.

Tagged as: Federal Reserve, International Monetary Fund