Bailouts and Bulls***: Fed Officials Claim ‘No Cost to Taxpayers’ in SVB Deal
13th March 2023
The Other McCain jerks back the curtain.
The money has to come from somewhere, and the only source for money that the government has is taxpayers. They can blabber all they want about ‘no cost to taxpayers’ but that’s an obvious lie.
March 13th, 2023 at 07:51
Actually, that’s not true. The government or equivalently, the FED, can and does create “money” out of thin air. Most “money” is electronic bookkeeping. Only a tiny fraction is actual coins or currency and even that is 100% paper and can be created without limit, subject only to availability of raw materials. Yes, I know there are supposed to be laws and regulations, that the FED has to observe. But in practice, such as with the current “emergency,” they create liquidity as needed.
By no means do I deny that the above is not done wihtout cost…the ultimate cost is that every new dollar created dilutes the value of existing dollarss. But everyboedy’s happy. The charade contineus one more day. Problem: eventually that money may be used to buy real goods and services, and then…inflation.
March 13th, 2023 at 15:14
Actually, it is true. What the Fed creates is not money, but currency. Money is a commodity that, because of its general acceptability as a store of value, is used as a medium of exchange; it cannot act as a store of value unless it has intrinsic value itself. Currency is used as a medium of exchange, typically by law or other coercive measures, but has no intrinsic worth and therefore cannot act as a store of value. That is why economists refer to ‘fiat currency’ but not ‘fiat money’ — money cannot be established by government fiat. Likewise, when economists discuss inflation, they talk about ‘inflated currency’ rather then ‘inflated money’.
My economics adviser at Yale, James Tobin, possibly the single most boring person I have ever met, was eventually given the Nobel for his work in monetary theory, although from a Keynesian perspective.
Read von Mises, THEORY OF MONEY AND CREDIT, for a comprehensive treatment (from an Austrian point of view).
March 14th, 2023 at 03:25
Hearing the government say that there’s nothing for us to worry about as huge banks collapse reminds me of a comedy skit in which a British ship officer is confronting frightened passengers on the Titanic by saying, “No need to panic! We’ve only stopped to take on a bit of ice.”