So much seems new in all this public Fed action in the last year or so with propping up banks and making loans or bail outs. It seems to shock many who perceive that the Fed is somehow unilaterally creating money out of thin air to use in these various financial transactions. Americans in droves are showing up on various blog sites to complain about these bailouts as being somehow un American or worse, slight of hand or criminal. Congressional action also seems to be getting an unusual amount of scrutiny appearing to be simply a lap dog to the banking and other corporate interests. Well, welcome to the new age of central banking transparency promised even, by Ben Bernanke the present Chairman of the Federal Reserve.
The plain simple truth is, there is absolutely nothing new in any of this other than the media attention which is giving Americans a peek inside, if you will, of the Federal Reserve powers and processes. A revealing of the fact that money is indeed created by a decree, order, or the technical jargon term, Fiat. That's how it works and that's how it has always worked since the inception of Central Banking. Really, would anyone have noticed a change in their lives if the Fed had simply done all this behind the scenes as was typical before Ben Bernanke? I don't think so, besides, what is there to notice now, even with all of our new information, or shall we say, being in the loop of the workings of our Central Bank?
The concept of money, how it comes to be, how it flows, how it gains or loses value, the rules of life and money, have not changed one bit for you and me out here in the world as we find it. No, today, just like yesterday, if I want more money, I will have to barter for it, either with some service I can offer or a thing that I have to trade for that money. Same exact deal, nothing has changed for me at all in my personal relationship with money and its potential uses.
Perhaps it unsettles Americans and others, who now thanks to this new FED transparency, somehow think that their money has changed. The short answer is, your money hasn't changed. Money has always been created by fiat since the establishment of our Central Bank, the Federal Reserve. Money has also always been created by Government spending, where in money is created by appropriation(congressional term for fiat money especially in this age of infinite deficit spending) to fund the majority of these Government programs. Taxes, are levied, sure, but taxes no way account for how the Government continues to spend and go into deficits while our money supply continues to steadily expand. Is there some breaking point in all this, well, probably not, why should there be?
The Government is not going to default, the Federal Reserve is not going to quit creating money, the economy at large (our finacial lives) will continue to expand and contract cyclically and that's what you feel day to day, again nothing new here, except for perhaps the scale or size this game today. So get used to it, you want some more money, you'll have to continue to earn it one way or another. Unless you can get yourself in the way of a Government entitlement program that's designed for us, the masses, not like the kind for the banks or Bankers. That rule will never change and yes, the masses and the bankers play by different rules.
(Some may confuse the act of money creation with politics.)
Besides, let's face it, who's going to be the first to try and declare that their money is worthless? You? Me? I don't think so.
Special thanks to my friend Artie for inspiring this essay.