Money creation does not benefit equally. It creates a class of winners (those who get new money first) at the expense of losers (those who get new money later). Not surprisingly, an inflationary money supply increases the wealth and income gap in society.
Janet Yellen testified before Congress this week, but the Senate Republicans, who claim to be the guardians of monetary sanity, failed to show any true understanding of monetary policy and the damage the Fed has inflicted.
Austrians today are nearly alone in asserting what the classical economists all knew. You cannot create prosperity by creating more money, but only through increases in technological progress, frugality, trade, and a division of labor.
Central banks and their favorite economists are everywhere worried that central banks may be too weak to keep the current “expansion” going. If central banks are too weak now, what will happen when they get the strength they want?
When a central bank devalues a currency, it is often said that the devaluation will help exporters, and thus the whole country, as a result. But this simplistic analysis ignores the many downsides of inflating the currency.
Many people think of their investments and their money in the bank as their savings, but savings and money are not the same thing. Nor will creating more money create more savings.
Government loans often feature lower interest rates than what can be found in the private sector. But this is only because these cheap loans are taxpayer subsidized. Meanwhile, the government bans many private loans that risky borrowers need most.
Economist Philipp Bagus talks with us from Europe about the Swiss franc, the euro, and what the future holds for the debt-laden governments of the Eurozone.
