Running Interference

Because the Daffodils should be out already, and are not, here is a photo from years gone by taken only a few blocks from our home.

"Quantitative easing" and "monetizing the debt" are the two new buzz phrases of today's economic reality. On Wednesday the US Fed began monetizing the debt which helps with quantitative easing. There now, that helps, doesn't it?

Here is what they are doing. If you or I were to invest in a Government Saving Bond or a US Treasury bond, we would take the money out of our bank account, or out from under our mattress, and go purchase it. Money would change hands and there would not be any more or any less money in the system, it would just go from our account to the Government's account. But now the Fed is buying its own US treasury bonds and it is creating money of thin air to do it. Now the money supply has just increased and it is called monetizing the debt or turning debt into money. Now, wasn't that easy? With the planned treasury purchases, the supply of money, or the base amount of money 'out there' will increase by 500% !

This is not just tinkering with the economy, but a deliberate attempt to decrease the value of the US dollar and to also create inflation. Two things are supposed to happen then. The cost of the debt owed to foreign banks just decreased and inflation will follow as sure as the flowers follow the rain. We, as consumers, will then run out and purchase stuff before our money becomes totally worthless. This is how the economy will get back on track. At least, that is the theory. Japan did this 20 years ago and their economy has been in the tank ever since. It will be interesting to see how this plays out in our society.