Free Markets, Free People

John Maynard Keynes


“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.

~McQ