We’d all be rich, right? The economy would take off like a rocket ship with all the consumer spending that would result, right? Jobs would be plentiful…Oh, wait. We wouldn’t need to have jobs. We’d all have $20 Million! Why would anyone want to work when they already have all that money? So, screw jobs. Who needs a job? Just get your Ferrari, 5-bedroom house on a shady street, condo in Tuscany, and whatever else you want with the several million bucks you’ll still have left over.
You might be thinking that even though Ben Bernanke might just shower everyone with $20 million and call it QE 94, there’s probably a catch somewhere. It probably wouldn’t work out to be as rosy as I’m describing it. But why is that?
Here’s why. If the government printed up enough money to give everyone $20 million, no one would be any richer. How so? Well, printing money does not increase the amount of goods and services available in the country for consumers to buy. The result would be that each person’s sack of $20 million greenbacks wouldn’t buy them any more than they can buy now with their current net worth. When a popsicle costs a million dollars and a loaf of bread costs $5 Million, even $20 million won’t go far. It is because all that newly printed money would not represent any increase in the stock of goods and services that this scheme would fall flat. The only thing that creates more goods and services for consumers to consume is Americans working to produce more goods and services. It’s supply side economics, the only kind of economics that explains why the economy grows, or fails to grow.
Now think about what the Fed has been doing for a good long time now with it’s so-called quantitative easing. So far the Fed has created One Trillion Dollars of fake money, not real money, just digital transfers on a balance sheet. This $1 Trillion is not the result of any additional goods and services being created in the economy. It does not represent any corresponding increase in the total wealth of the country. It has created a bubble in the stock market so that people who own lots of stocks feel a lot richer, and temporarily at least they might actually be. If they sell their stock holdings and buy real estate before the bubble bursts they might actually hold on to some of the tentative wealth they have gained in their stock holdings. People who don’t own lots of stocks aren’t in the game but will still suffer greatly when the bubble bursts. That’s because the hyper inflation that is sure to follow will destroy the value of any savings they have as well as make whatever income they earn worth a lot less in terms what it will buy. The bubble will have to burst some day, no one can say when, because it was not an increase in economic productivity that created the rise of stock prices. It was Ben Bernanke’s fake money that was used by the FED to buy stocks and bonds and driving up the price. [Don’t try to do this, only the FED can buy stocks with fake money] The tremendous increase in stock values as a result will prove to be just as illusory as the fake money when the party ends. The party had a short invitation list. Only those on the list, those already rich enough to own a lot of stocks, got to enjoy the fun. They’ll get hurt a little when it’s over, but all those millions who couldn’t get in will suffer the most. They’ll lose the shirt they have left when their income fails to keep up with the rise in prices for just about everything. Think South America. Think South American peasant class. It’s the largest class.
Obama and the Democrats were largely the architects of this mess. And they are the ones who care about the little guy?