Free Markets, Free People

“Bernanke Bucks” And The Danger Of Hyper-Inflation

I saw the following two quotes in a Patrick J. Buchanan piece. Now I’m not much of a Buchanan person by any stretch, but the quotes resonated with me and I found myself agreeing with much of what Buchanan said.

“The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” –Ernest Hemingway

Hemingway wasn’t an economist, but there are plenty out there consider John Maynard Keynes a fairly good one, even now. And he said much the same thing about the economic side of the Hemingway quote:

“The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

Right now, in lieu of dollars, our Federal Reserve is in the midst of printing trillions of “Bernanke Bucks”. I hesitate to call them dollars, even though they’re similar in their look and feel. But in essence they are worth little more than the paper they’re printed on. And although you can’t tell them from the dollars circulating out there, their presence makes the those dollars worth less. The more BB’s there are out there, the less the remaining dollars are worth.

It is called “monetizing the debt”.

Or to pick up on Keyne’s point, we’re right in the middle of debauching our currency.

Now, there are several reasons for doing what is being done, and you may or may not agree with them. But it really doesn’t matter. Whether you agree or disagree, printing money for the right reasons or the wrong reasons still has the same effect.

If you think taxation is theft, inflation is no less than that. And in this case it is a calculated theft. Those printing the “Bernanke Bucks” know precisely what the effect on your net worth will be.

Buchanan concludes his piece pointing out what we’ve talked about here for months – this is all about the belief we can avoid the pain:

Yet one senses that we are doing again exactly what we have done before in this generation. Rather than endure the pain and accept the sacrifices to cure us of our addiction, we are going back to the heroin. And this time, with Dr. Bernanke handling the needle, we may just overdose.

The road to hyper-inflation is paved with good, but seriously misguided intentions.


5 Responses to “Bernanke Bucks” And The Danger Of Hyper-Inflation

  • Actually they’re saving money on paper and not even printing that much.  The money will just appear on balance sheets instead.

  • Maybe we need to push for a new constitutional amendment, or several amendments, to guarantee our property rights.  For instance an amendment forbidding deficit spending except in times of declared war.

    • Not that I disagree in principle with the idea of amendments to protect our property rights, but after the Kelo decision raped the Fifth Amendment, what makes you think that the Congress and courts will pay attention to ANY part of the Constitution if it doesn’t suit their purposes?  The Ninth and Tenth Amendments are dead letters.  Representative Bachmann asked the Tax Cheat in Chief what part of the Constitution would allow the government to take over private corporations and he couldn’t answer… because there IS no answer other than expediency.  Geithner punted and said that Congress voted for it.  Well, HELLLLLLOOOO!!!  Congress could vote to bring back slavery, you thick f***, and it would be (wait for it!) UNCONSTITUTIONAL, no?  Just because Congress votes for something doesn’t make it CONSTITUIONAL.  Read up on a little-known man named Mr. Chief Justice Marshall some time: it will be quite educational for you.


  • “Debauching the currency” is a great turn of phrase.  Better than Bernanke Bucks.

  • There’s no difference between those dollars and any others, sorry. The value of any dollar decreases due to inflation, yes, but the new notionally-printed (as Ann points out, dollars are not and have long not been <I>all or even mostly in paper</i>) dollars are utterly indistinguishable in value from any others. Currency is entirely fungible – if it wasn’t, the new dollars wouldn’t have an inflationary impact (or would have a significantly reduced one).

    That being said, I see no reason to fear <I>hyper</i> inflation.

    (Note that while M3 numbers are no longer released [probably no longer even calculated and given up on as too difficult or unrelaible], the <a href=””>latest M2 numbers</a> from 2009 show over 8 trillion dollars in M2 money floating around.

    I’m unclear as to <I>exactly</i> which Fed action you refer to for “trillions of Bernanke Bucks”, but I doubt they’re going to have an M2 effect of even doubling, which is the bare minimum I’d consider “hyperinflation”.

    A search on the subject reveals mostly a lot of “patriot” type cranks providing sourceless graphs that <I>don’t look anything like the Fed numbers</i>* or un-sourced quotes from “analysts” claiming a 5-fold increase in an unspecified M measure (I presume M2)*. I imagine your sources are better, but overall it’s disheartening.

    * The one I have in mind claimed that the unspecified M measure they were using went up slowly until 2008 and then skyrocketed, roughly doubling in the past year. This is, of course, <I>nothing like</i> the Fed’s numbers for M1 or M2.

    I’m incensed enough, in fact, to post a link here for edification: <A href=””>Thusly</a>. How his graph can be reconciled with the actual numbers is beyond me – and conveniently the poster doesn’t include the source. It doesn’t match M1. It doesn’t match M2 – the numbers are far too low, and the growth at the end too high.

    Then again, looking at his links, it appears to just be an echo-chamber of Imminent Economic Doom Predictions. But this is all digression…)