Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Modern Monetary Theory Part II: Money and The Limits of Empire

Interest-Rates / Quantitative Easing Feb 13, 2011 - 06:20 PM GMT

By: Jesse

Interest-Rates The limit of the Fed's and Treasury's ability to create money is the value and acceptance of the dollar and the bond in market transactions.

The Weimar government never 'ran out of money.' Zimbabwe never 'ran out of money.' And if interest is paid 'in your currency money' you can never fail to service your debt either.


What they did run out of were people willing to take their paper at its intended value, from the outside in. Outside means those who are exterior to their compulsion of legal tender.

This is why the system breaks down unless you can extend an ever greater circle of coercion of paper valuation. Without the complicity of a few well placed allies like the Saudis, the dollar would already be done.

It really is that simple. That is what makes it a sophistry. "I can print money, therefore I can never go broke."

There is nothing modern about it. It is a just a ponzi scheme with a sovereign backstory. It is just the same old song with slightly different words of imperial hubris and overreach, back to the days when King Canute disproved the limits of the will to power to his advisors.

There are much more elegant defenses of this scheme, coming out of the friends of the Fed. But they generally obfuscate the tag lines more elaborately. Or they just skip the story and try to appeal to the authority of ridicule.

So again I thank Cullen for stating the case so simply and so straightforwardly.

The US dollar, which started out well, has become a ponzi scheme. There are those who can be forced to participate by the laws of legal tender, and their authoritarian regimes who are its allies. Value is what the Federal Reserve says it is, and however it chooses to distribute it.

A sound currency is both a medium of exchange and a store of value. It is not clear to me that the dollar has passed the point of no return. But it is obviously unstable, as much now a wealth transferral mechanism as a store of value, being the principle medium and bulwark of a corrupted system. And therefore it is making its holders understandably nervous. Without a serious reform of the financial system and the economy, the dollar will continue to decline and eventual reissue.

This is not to say that the Fed is evil. It is to say that it is merely human, requiring the restraint of law and oversight, audits and constraints. In their wisdom the framers of the Constitution required checks and balances, knowing full well the hard lessons of history and human nature. And in their error, some men have placed themselves above the law and such constraints, ironically in the name of 'independence.'

In general, the impulse to liberate the natural goodness of markets and institutions by dispensing with regulation and oversight merely knocks down the fences, giving free range for the rapacious wolves to do their worst. And this has been their objective from the first.

Every thing secret degenerates, even the administration of justice; nothing is safe that does not show how it can bear discussion and publicity...The danger is not that a particular class is unfit to govern. Every class is unfit to govern.”

Lord Acton

By Jesse

http://jessescrossroadscafe.blogspot.com

Welcome to Jesse's Café Américain - These are personal observations about the economy and the markets. In providing information, we hope this allows you to make your own decisions in an informed manner, even if it is from learning by our mistakes, which are many.

© 2011 Copyright  Jesse's Café Américain - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in