Thursday, Sep 18, 2008
Since there is no limit to the amount of money the Fed can create, there is no limit to the number of assets they can acquire.
321gold: Comrade Bernanke Does it Again
By nationalizing nearly 80% of AIG for $85 billion, the Fed is doing a lot more than simply flushing taxpayer money down the toilet. The greater wrong is allowing the agency that has the power to print money to take control of a private enterprise, especially without the approval of the company's shareholders. The move represents the largest lurch toward socialism that this country has ever seen, and signals the end of the vibrancy of America's once vaunted free market economy. Since there is no limit to the amount of money the Fed can create, there is no limit to the number of assets they can acquire.
Posted by malct @ 05:46 PM (302 views) Add Comment
5 Comments
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1. Richard Davidson said...
Great. Marx predicted this, you know.
2. jonb said...
There is a limit to the number of assets they can acquire, because if the Fed were to create unlimited amounts of money, people wouldn't be willing to swap their assets for it.
3. shipbuilder said...
I thought the Fed was a private company? So not really socialism....just as the US economy wasn't really a free market.....
4. mark wadsworth said...
*sigh*
The Fed can 'create' money in two ways.
1. Printing notes, which merely serves to devalue existing notes (=inflation) so the total value of notes stays same (see Weimar Republic, Zimbabwe etc)
2. Issuing treasury bonds, which are secured on future tax revenues (i.e. government bonds are just deferred taxation). So pushing up interest costs (which devalues assets) and acting as a clear signal that there will be a future burden on the economy and according to Ricardo's law of equivalence, there is no difference between a tax hike now and government bonds.
So the Fed cannot magically make itself wealthier - it is just borrowing.
This is exactly the same as you borrowing £100,000 to buy something worth £100,000. Your net wealth has not changed by one penny, you have merely inflated the asset side and the liability side of your personal balance sheet by £100,000 each.
*/sigh*
5. plato said...
Thankyou mark wadsworth. Another reason my personal wealth(and not only mine) has declined. These are the answers I was looking for. More to follow..................................