Who’s Getting Hurt and Who’s Being Helped by the Money-Printing

April 9, 2014

I’m writing again this week about some of what I heard Mr. William White say in the interview I listened to. As a reminder, he is a central banker and has worked for various world and central banks around the world.

The Fed has been keeping interest rates extremely low. According to Mr. White, this has been to the benefit of two groups: 1) the poorest people who have very few assets and a lot of debt and 2) the very wealthy who can borrow at these ridiculously low rates and invest in the assets that are being pumped up by the money-printing (e.g. stocks).

The people who are being hurt by the low rates are the middle class (big surprise). They have little debt and a lot of conservative investments. The conservative investments include cash sitting in a bank account. They’re making very little on the money they have sitting in the bank (less than 1%) and the currency is being debased because of all the money-printing.

Another way to say this is that the creditors (the people who let others borrow their money) are being hurt and the debtors (borrowers) are benefiting. And lest you forget, the U.S. government is the biggest debtor in the history of the world (as Jim Rogers likes to point out).

William White says that economic and monetary models are useless. They treat the economy as if it’s a machine, when in reality, it is more like an eco-system. There are so many different factors at play that it’s impossible to tell what effect changing some of the inputs will have on other factors. There’s no equilibrium in an eco-system because everything is constantly changing, growing, and competing for resources.

As proof that economists are just making things up, Mr. White said that every aspect of monetary policy has changed more than once over the last 50 years. Monetary policy is not science. It’s not possible to know what the results will be when changes are made.

And one more point to expose the fact that the economists running things are clueless: We had a huge crisis which was not predicted by any mainstream economists. This crisis has gone on for several years and the mainstream economists did not predict that, either. And still, they keep doing the same thing they’ve been doing for years which has not helped the situation at all. Does this give you confidence in the economists who are running things?

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