Counterfeiter extraordinaire

That is what the US Federal Reserve (or any central bank for that matter) essentially is-

If not through taxes, and if not through infinite debt, how is it that the US government gets the money it wants regardless of other constraints?

The answer here comes down to the monetary regime, a topic that causes eyes to glaze over but which is central to why the government seems completely out of control. It is not difficult to understand if we think of how a criminal with a counterfeiting machine might behave. Would we see fiscal restraint? Of course not. If a person could create all the money he needs or wants with a printing press, we would expect unlimited profligacy. This is precisely what the Federal Reserve does. It not only acts as the guarantor of the liquidity of the banking system but also functions as the guarantor of the entire government financial system. –Why Taxes Don’t Matter Much Anymore (Jeffrey Tucker –

Though saying that central banks are skilled counterfeiters is giving them too much credit.

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  • Pramod Biligiri  On September 13, 2008 at 1:35 am

    Even India is in the same inflationary boat now. Do people really believe RBI can manage the money supply?

    But fiat money is so firmly entrenched practically and psychologically. I really wonder how we’ll make the transition back to sound money…

  • aristotlethegeek  On September 13, 2008 at 5:29 am

    People have “zero idea” of what all this is all about. I doubt if most of them (including the FM and RBI governor) know what inflation really means.

    The gold standard or any similar sound standard of money is a distant dream. As far as India is concerned, I can safely predict that that is not going to happen within my lifetime.

  • Pramod Biligiri  On September 15, 2008 at 1:58 am

    I am pretty sure our top finance guys understand inflation. It’s just that only keynesianism can give governments that powers they want. Socialism + fiat money are a killer combo.

    The USA will be more interesting to watch, for monetary upheavals. I keep thinking, “something’s gotta give”.

  • aristotlethegeek  On September 15, 2008 at 7:00 am

    Comes down to the question of intent, doesn’t it? They know what’s right, but won’t do it because they want absolute “control”.

    The US. Sometimes I think the only way out of the while mess is a massive systemic collapse. Unfortunately, people will blame the entire thing on capitalism and “less” regulation! They still think inflation equals prices going up.

    Yesterday, ET published an interview with Jim “socialism for the rich” Rogers. The only thing he believes in are commodities. Real goods have more value than pieces of paper signed by governors and finance ministers.

  • Pramod Biligiri  On September 18, 2008 at 1:02 am

    Just a good interview of Jim Rogers on CNBC today, though the interviewer was practically fawning on him. It’s a tribute to America that they have strong sound money advocates even in these times. Indian doesn’t have such a strong culture though :|

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