Tuesday, September 6, 2016

Money from nothing; "ECB's QE bond buying hits €1 trillion milestone"

Regardless of the dollar price involved,
one ounce of gold would purchase a good-quality man's suit
at the conclusion of the Revolutionary War, the Civil War,
the presidency of Franklin Roosevelt, and today.

Peter A. Burshre

"The European Central Bank's quantitative easing program passed a milestone last week, topping 1 trillion euros in purchases after 18 months of aggressive bond buying. ECB figures for the week ended Sept. 2 show the central bank has now bought €1,001 billion in sovereign debt."


Where did the ECB get the money?

"These programs, one after another, are simply designed to somehow pacify
and hoping to keep [prices] going up,
and that somehow that will fool the people into thinking they are wealthier
and they will spend money.

When you tell politicians they can issue $100 billion of debt a month for free,
how do you expect them to do the right thing,
and ask their constituents to sacrifice?

I think the [ECB, BOJ etc... are] injecting high grade monetary heroin
into the financial system of the world,
and one of these days it is going to kill the patient."

David Stockman

Why did the Athenians create more money by decreasing gold and silver coin content
during the Peloponnesian war?

Athenian money…defined a pattern
which was to repeat in other empires which were to follow,
dominance of trade, influx of gold to balance exports, public wealth,
liberty, overconfidence, the discovery of loosely managed money
as a stimulating solution to stagnation in an economy near its zenith…,
before finally the emptiness of the monetary promise was exposed,
leading to rapid national collapse.

Paul Tustain

Does earn today, spend tomorrow, conflict with borrow to spend today
and hope to earn enough tomorrow, or that someone else does?

"Why did the Roman Empire reduce currency size and silver content
to increase the quantity of money during war against Hannibal?

Where under the [Roman] Principate the strategy had been
to tax the future to pay for the present,
the Dominate paid for the present by undermining the future’s ability to pay taxes.

The Empire emerged from the third century crisis,
but at a cost that weakened its ability to meet future crises."

Joseph Tainter

Did Spanish money become worth less
after the Emperor borrowed against 100 years of future tax revenue
to pay for war against England?

Did France execute relatively the same strategy
with similar consequences not long after?

By the time the great bullion inflow had ended in the mid-seventeenth century,
the Spanish crown was deep in debt, with bankruptcies in 1557, 1575 and 1597.

The country entered upon a long decline.

…one might draw a moral: Easy money is bad for you.

It represents short-run gain
that will be paid for in immediate distortions and later regrets.

The Wealth and Poverty of Nations

Why did the Continental Congress issue paper money
backed by anticipated tax revenues to pay for war against theocratic England?

"Nations are not ruined by one act of violence
but quite often, gradually, and almost imperceptibly
by the depreciation of their currency through excessive quantity"

Nicolas Copernicus
Discovered Earth was not the center of the Universe

If a nation prints more money
like cutting a 16 inch pizza into 12 slices instead of 8
is each slice worth less?

What if the pizza shrinks while the number of slices rise?

Little by little, business is enlarged with easy money

With the exhaustless reservoir
of the Government of the United States furnishing easy money
the sales increase, the businesses enlarge, more new enterprises are started
the spirit of optimism pervades the community

Everyone is making money, everyone is growing rich

It goes up and up…until finally someone whose judgment was bad
someone whose capacity for business was small, breaks
 and as he falls he hits the next brick in the row, and then another
… and down comes the whole structure

That is what happened to greater or less degree
before the panic of 1837, of 1857, of 1873, of 1893 and of 1907

Elihu Root

If less than 1% of at least 15,000 professional American Economists
foresaw the financial crisis, and many work to keep investors invested
for their industry paymasters, 
should many financial industry prognosticators be relied on for anything?

"No State shall… make any Thing but gold and silver Coin
 a Tender in Payment of Debts"

Article I, Section 10, Clause 1
The Constitution of the United States

Have the world's central banks abused currencies
to avoid overtly raising domestic taxation
by covertly taxing assets by over-printing money
for the benefit of the rich and powerful,
at the expense of the poor and future generations who will be stuck with cleaning up the mess?


Donald Trump, who has previously accused the Federal Reserve 
of keeping interest rates low to help President Barack Obama, 
said on Monday that the U.S. central bank has created a "false economy"

The Fed has been a target of some conservative critics in the U.S. Congress, 
who say the bank risked sparking inflation with its easy monetary policies 
in response to the global financial crisis.

Steve Holland

No one went to jail