Thursday, November 21, 2013

Money Illusion

Here, Philipp Bagus offers a crystal clear explanation of how the Fed and other central banks around the world are systematically misleading millions of people to believe that all is well.  All is not well.

By monetizing federal debt (so-called "Quantitative Easing" to the tune of $85 billion per month), the Fed is "papering over" past attempts to borrow something that had not yet been produced and saved (albeit with digital paper instead of real pictures of dead U.S. presidents).

Regular readers of EconoBlast need no reminder of the impossibility of borrowing something that has not actually been produced and saved.  New comers to EconoBlast can read all about it here.

 What does the future hold for Americans who are members of the Baby Boomer generation?  Will the financial claims many of us hold (stocks, bonds, savings accounts, and just plain money) have real purchasing power over the next two or three decades when we Baby Boomers expect to spend those claims on real goods and services?

Sadly, much of the financial wealth we Baby Boomers take ourselves to hold could turn out to be an illusion.  Just as Philipp Bagus reminds us in the article linked above, we cannot consume our financial wealth.  We can consume only real goods and services.

Will our economy produce the real goods and services we Baby Boomers financial claims are supposed to allow us to purchase?  The Fed is doing just about all it can get away with to make that possibility vanishingly small.  Please read the Bagus article linked above.  He's already explained it clearly, so I won't bother repeating his words.

Against all odds, I remain optimistic that our economy will produce the real goods and services necessary to honor the financial claims of Baby Boomers.  I remain optimistic in spite of the misguided policies of the Fed and our federal politicians.

I believe that technology will save us from ourselves, just as it has always done in the past.  Give the audio file you will find here a listen.  Put simply, advancing technology will almost certainly make America's $17 trillion federal debt irrelevant!  That distinct possibility is no excuse for the self-serving actions of the Fed and federal politicians, but it is nice to know.

In the nearby future, the combination of artificial intelligence, nano technology, and technologies not yet heard of will mitigate the scarcity of real goods and services so dramatically that most people living on planet Earth will enjoy a very high standard of living --- without working.

Some people think that not having to work will destroy society.  Other people (like me) do not think so.  Not having to work to keep body and soul together will be wonderful, not a scourge.  Am I just a fool with a dream?  You decide.  Listen to the audio file linked above before you decide. 

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