Posted tagged ‘Counterfeiting’

Printing Money Doesn’t Equal More Savings

February 17, 2015

In this article titled, You Can’t Create More Savings By Printing More Money, Frank Shostak (mises.org) shows us that what you produce is actually what you can consume or exchange for something that you haven’t produced but want to consume. What you don’t consume or exchange is what you save. Savings is real production. Money is what we use to make the exchange process easier. Money is how we figure out exchange ratios between goods and services. Exchange ratios represented by prices in money is how 1 gallon of gas costing 2$ can be exchanged for two 1$ candy bars, or four 50 cent news papers, without ever exchanging the actual goods. Printing money isn’t the creation of any good of service. It is the creation of the demand for a good or service that is not backed by actual production. Printing money is theft.

Here are some excerpts from the article.

“Savings has nothing to do with money. For instance, if a baker produces ten loaves of bread and consumes one loaf, his savings is nine loaves of bread. In other words, the “savings” in this case is the baker’s real income (his production of bread) minus the amount of bread that the baker consumed.”

“When a baker sells his bread for money to a shoemaker, he has supplied the shoemaker with his saved, unconsumed bread. The supplied bread sustains the shoemaker and allows him to continue making shoes. Note that the money received by the baker is fully backed by his unconsumed production of bread.”

“Money can be seen as a receipt, as it were, given to producers of final goods and services that are ready for human consumption. Thus when a baker exchanges his money for apples, the baker has already paid for them with the bread produced and saved prior to this exchange. Money therefore is the baker’s claim on real savings. It is not, however, savings.”

“The printing of money therefore cannot result in more savings as suggested by mainstream economists, but rather to its redistribution”

“…. savings is not about money as such, but about final goods and services that support various individuals that are engaged in various stages of production. It is not money that funds economic activity but the flow of final consumer goods and services. The existence of money only facilitates the flow of the real stuff.”

Related ArticleWhat Comes First, Production or Consumption, at austrianaddict.com.

Related ArticleCapital Consumption, aka Eating Our Seed Corn, by austrianaddict.com.

Related ArticleDoes The Supply Of Money Have To Increase To Accommodate Increasing Production, by austrianaddict.com.

 

A Housing Recovery, Or Just Another Bubble?

May 29, 2013
English: Blowing large soap bubbles at sunset

Blowing large bubbles  (Photo credit: Wikipedia)

THE WEALTH EFFECT.

Since the housing bust and the corresponding economic downturn in 08, the Fed has been trying to create the “wealth effect”, using its double-edged sword of near zero interest rates and injecting counterfeit money into the banking system. I don’t know if they realize it or not but this double-edged sword is what caused the artificial housing boom which collapsed in 08.

The wealth effect starts from the Keynesian belief that consumption drives the economy. A vast majority of economists, politicians, and bureaucrats believe that if individuals feel wealthier because the value of the stocks and bonds they own are increasing, and the value of their house is also increasing, they will spend more. This increase in consumption [aggregate demand] they believe, is  what drives the economy. Unfortunately if the policies they are implementing are based on a fallacy, the policies will also be  fallacious.

WHAT DRIVES THE ECONOMY SAVINGS OR SPENDING?

The truth is savings, capital formation, and entrepreneurial activity is what drives the economy, not consumer spending. (more…)

Does The Supply Of Money Have To Increase To Accommodate Increasing Production?

April 29, 2013
Monopoly Money

Monopoly Money (Photo credit: John-Morgan)

QUESTIONS CONCERNING MONEY.

I’ve had some questions recently that have to be addressed. 1) If production increases without a corresponding increase of money, would that not cause deflation? 2) If the currency is to be increased to correspond with the increase in production, how is it increased without theft? The simple answers to these two questions are yes to the first one, and, it can’t, to the second one, but that doesn’t help us understand the why’s and how’s.

UNDERSTANDING MONEY.

I wrote a post titled, “We’re All Born In The Middle Of The Story”, in which I quote Thomas Sowell who said, “results observed at a given point in time may be part of a process that stretches far back in time“. Understanding this quote should be our default position for everything we observe and analyze. When it comes to money we are all born in the middle of the story. What do I mean by that? (more…)

Murray Rothbard Warns About Coordinated Counterfeiting Of Paper Money by Governments.

March 25, 2013

Watch this video of Murray Rothbard being a prophet about Governments wanting to coordinate their counterfeiting of paper money.

The Federal Reserve, the European Central Bank, the Bank of China, and the Bank of Japan, are all counterfeiting paper dollars, in a seemingly coordinated way. This starts the world down the road of consuming faster than the rate of production. Read, “What Comes First, Production Or Consumption“. It also creates malinvestment, (more…)