In this time of COVIDnitive Dissonance and uncertainty, one thing is certain: When you approve a TWO TRILLION dollar stimulus package overnight, you are going to make every American poorer over the long term.
If you don’t grok monetary policy, that’s totally understandable, it’s… complicated. BUT, it you do wonder why it seems like the rich are getting richer and the poor are getting poorer, or why a 3-bedroom house that cost $25,000 in your Pa’s day now costs $300,000… then you are wondering about monetary policy, even if not by that name.
Remember how your parents used to say, “Money doesn’t grow on trees”? Well, once Nixon took America off the Gold Standard in 1971, it now does kind of grow on trees… In the sense that the printing press just makes more of it, or at least, they add a lot of zeroes to the Federal Reserves balance sheets. Magic, right!?!
But wait, Carla, you say, surely if we can just make more money all the time, why couldn’t we just print enough, and IDK, raise the minimum wage to $100 an hour, and instead of the proposed $1,200 per person bailout, why couldn’t we make it, say, $1,000,000 per person!?!? Why, indeed… To answer this question, I recommend reading Ron Paul’s book “End the Fed.”
Or, if you prefer the nutshell version, here’s the answer: Money printing eventually causes hyper-inflation. You know, those sitches you’ve vaguely heard about from the–gasp! past!–where people used bills as toilet paper, where they would take money in wheelbarrows to farmers’ markets to buy an apple, and where people would make fires fueled by burning cash notes to stay warm. That kind of inflation… Sadly, this invisible enemy is little understood by the average person, and the government likes it that way.
“What a lot of people don’t realize is the Federal Reserve actually serves as a taxing authority. Of course, the central bank can’t pass a tax increase. But the creation of money is, in fact, a tax. If they can take a dollar and reduce the value by 50%, they have liquidated debt, which is always necessary. But it’s also a tax because the people’s income gets lowered as well. But the big thing is, not everybody suffers the same consequences… The people who get the money first – the government, big banks, the big corporations, the military-industrial complex – benefit. It’s not because of a free market. It’s caused by crony capitalism and our monetary system.”
Ron Paul