Addendum Last Wednesday’s Post

It has been suggested to me that creating money (on paper or digitally) doesn’t negatively affect people, because the amount that people are paid ALSO goes up.

Yes And No

While this is accurate in principle, it is not TECHNICALLY factual.  Here’s why:

If wages go up in direct proportion to the amount of money supply (”created out of nothing” money), then YES, the value of your currency is still the same.  This, however, is NOT what is currently happening.  Wages have been STATIC for several years now, but money supply has been increased at an alarming rate (see graph below).

As you can see, the Y2K scare in late 2000 and the attacks on the World Trade Center in New York in September 2001 made the Federal Reserve increase money supply slightly,  but they quickly brought it back down by absorbing it back (taking back digitally invented money and ACTUALLY burning physical notes!).

These were mere blips on the radar compared to what is happening now, as you can see.

Borrowing

Also, you must consider the amount of money, (in the form of goods that are imported and paid for in the form on promises on paper, sometimes called Treasury Bills.  These promises have been used to artificially prop up people’s standards of living by making it possible to buy lots of cheap, imported goods.

Soon, these will not be available as other countries, mainly China, refuse to accept (buy) T-Bills any more.

Standard Of Living

While your standard of living may have improved over several decades, this was NOT because the U.S.A. was getting wealthier, but simply because it was getting further into debt.

This can’t (and won’t) go on, as you will see in the coming years as prices of things keep going up, and your wages don’t.

Manufacturing And Exporting

Like all trading, whether it’s between two people, two states or two countries, you HAVE to have something that the other party is willing to trade you for.

Without a strong manufacturing base, countries like the United Kingdom and the United States can ONLY regress their standards of living.

The ONLY things that can stop this happening to countries like these are:

1. Start to produce things (manufacturing) that other countries will trade for

2. Go to war to TAKE what your country wants/needs

History shows that when politicians (who do NOT understand economics for the most part) have messed up so badly that they have nowhere to turn, they will take “their” countries to war.

Yes, they’ll blame it on other people or other countries, because it’s NEVER THEIR FAULT.

Luke.