Thursday, June 7, 2012

Printing Money = Stealing from You

When governments spend too much money and get into a debt crisis, there are two ways to solve it:
  1. Run surpluses by reducing spending, increasing taxes or growing the economy to generate more tax revenue.  Stimulus spending is the method usually attempted to grow the economy.  However, this method is near impossible to do when the country has a debt crisis and has no money.
  2. Print money.
As countries like Greece and France have shown, when their voters replaced pro-austerity politicians with anti-austerity politicians, democracy will not allow countries to run balanced budgets very often or at all, let alone budget surpluses.  Therefore, most countries have ran budget deficits for decades.

When debt levels become too high, unmanageable and become a crisis, countries eventually resort to printing money.  This is what many countries have done, such as African countries and South American countries in the 1990's.

What most people do not realize, is that printing money, by the government or anybody, is stealing money.  When the government prints money, it is no different than when a criminal uses a photocopier to counterfeit money.

As an example, if anybody counterfeits or prints $1 million, did he create $1 million of additional wealth for his country?  No.  The country's money supply increased by $1 million, but the quantity of goods and services did not increase.  Therefore, the prices for the goods and services will increase, which creates inflation.  The amount of goods and services that you can buy, decreases.  Effectively, the criminal stole $1 million of wealth from you and the population.

Let us use a simple example to prove this.  Let us say that our country has three people:  Tom, Dick and farmer Harry.  Our country has $4 in total money supply.  Tom has $2 and Dick has $2.  Farmer Harry can grow four oranges only.  Therefore, Tom can pay $2 for two oranges and Dick can pay $2 for two oranges.  Instead of this scenario, let us say that Dick counterfeits an additional $4 by printing it, doubling the country's money supply to $8.  Tom still has $2, but Dick now has $6.  Dick can now afford to buy more oranges.  Farmer Harry will now sell three oranges to Dick for $6 and one orange to Tom for $2.  The total wealth of the country has not changed.  It still has only four oranges.  However, by printing money, Dick has stolen wealth from Tom.  Tom became poorer.  This is essentially what happens when a criminal or the government prints money.

Some people think that printing money will not only solve debt problems, but also economic problems.  If this is the case, then there should not be any poor countries in the world.  Every poor country should simply print a lot of money and become rich.  Many countries have actually tried this throughout the world and throughout history.  All they have done was increase their money supply (not their wealth) and created inflation.  Some printed way too much money and created hyper-inflation.  This was the case with Zimbabwe when they experienced inflation in the thousands and millions of percent.  One $1USD became equivalent to $Z2,621,984,228 (source).  One cannot buy very many oranges with a Zimbabwe dollar.

Some people say that printing money is a way for the government to tax the population.  However, a tax is when the government tells you exactly how much wealth they are going to take from you.  When they print money, the government does not tell you that.

Stealing is defined as taking something from somebody without that person's knowledge or approval.

John Maynard Keynes stated: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.... The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

Below is a list of countries (from Wikipedia) that stole huge amounts of wealth from its population, by printing so much money that they caused hyperinflation:
"…nearly all hyperinflations have been caused by government budget deficits financed by money creation."
4.1 Angola
4.2 Argentina
4.3 Armenia
4.4 Austria
4.5 Azerbaijan
4.6 Belarus
4.7 Bolivia
4.8 Bosnia and Herzegovina
4.9 Brazil
4.10 Bulgaria
4.11 Chile
4.12 China
4.13 Estonia
4.14 France
4.15 Free City of Danzig
4.16 Georgia
4.17 Germany (Weimar Republic)
4.18 Greece
4.19 Hungary, 1923–24
4.20 Hungary, 1945–46
4.21 Kazakhstan
4.22 Kyrgyzstan
4.23 Serbian Krajina
4.24 North Korea
4.25 Nicaragua
4.26 Peru
4.27 Philippines
4.28 Poland, 1923–1924
4.29 Poland, 1989–1990
4.30 Republika Srpska
4.31 Soviet Union / Russian Federation
4.32 Taiwan
4.33 Tajikistan
4.34 Turkmenistan
4.35 Ukraine
4.36 Uzbekistan
4.37 Yugoslavia
4.38 Zaire (now the Democratic Republic of the Congo)
4.39 Zimbabwe
Some will argue that it is okay for the government to print money during recessionary or depressionary times because the money supply is shrinking (deflation).  This is what the U.S. Federal Reserve (Fed) has been doing when they printed billions to buy U.S. Treasury bonds.  This is known as Quantitative Easing.  The Fed is injecting money into the money supply.  The U.S. Treasury uses the money they receive from the Fed, to fund the spending and budget deficits.  This may be okay if the Fed eventually sells the bonds back to the U.S. Treasury to take the money back out of the money supply.  However, the U.S. government has to run surpluses to be able to do this, otherwise they have no money to buy the bonds back from the Fed.  As we have seen with most Western governments, democratic voters will not allow budget surpluses to happen.  Therefore, it is highly unlikely that the government will ever buy the bonds back and therefore, the printed money may never be pulled out of the money supply.  If this is the case, then the government essentially has stolen your wealth via inflation.

This is what will eventually happen in Europe.  Pro-austerity politicians are getting fired.  Therefore, they are not going to be running budget surpluses anytime soon.  The debt crisis can only get worse if their debts continue to increase.  Eventually, the crisis will become so severe that the European Central Bank (ECB) will have to print money and lots of it.  This money will be given to the European governments or banks.  The media will refer to this as "capitalizing the banks", "providing liquidity" or "lending money to the banks or governments".  When the borrowers (governments and banks) have no way of paying back anybody who lends to them, this is more like the ECB is printing money to give to them as gifts, not as loans.  Hence, the ECB will be stealing money from the European population.

This is not the only way the government steals money.  They are stealing trillions from children as well.

Read more:
Stealing from Children  
Europe's "Stealing from Children" goes into Overdrive
Socialism vs Capitalism 
Fake Economy 
Fake Wealth
Housing, the most manipulated market in the world


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