Highly recommended reading. Read this whole editorial. Saville is one of the best.
July 8, 2012
The Cons and Cons of Debt Monetisation
by Steve Saville
321 Gold
Although it probably won't happen within the next couple of months, it's a good bet that the ECB will eventually be prodded into monetising a large amount of European government and commercial bank debt. It is therefore appropriate for us to discuss the pros and cons of such a development, but since we can't think of any pros we'll have to focus on the cons.
A critical point to understand is that monetary inflation carried out by the central bank is a problem for the same reason that private counterfeiting is a problem. It results in an exchange of nothing for something and is therefore a form of theft. Nobody would argue that a private counterfeiter was providing a valuable service to the economy if he printed-up money to buy the bonds of financially-stressed governments, so why do many people believe that the central bank can do some good when it buys bonds with money conjured out of nothing?
Even believing that under certain conditions the central bank does no harm (rather than does some good) when it creates new money requires disabling the part of the brain devoted to logic and common sense. Of course it does harm! Adding to the supply of money cannot possibly add to the total wealth in the economy, and yet some people get richer as a result of the monetary injection. If some people get richer while the total wealth is not increased, then other people must be made poorer and what we are dealing with is a forced transfer of wealth.
Full article: http://www.321gold.com/editorials/saville/saville071712.html
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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