Stealth Wealth Redistribution

The Publius Forum ^ | July 7, 2009 | Dan Scott

[dscott8186]

A number of warnings have gone out about the printing of money. The Federal Reserve has been injecting money into the economy by buying US Treasuries in an attempt to keep down interest rates. Their efforts thus far are beginning to fail as bond rates are starting to climb. As we all know, the US Treasury has been forced to issue ever increasing amounts of bonds to finance Congress’s irresponsible spending. The chilling part is the bulk of the Stimulus money has yet to be spent meaning the US Treasury will have to significantly ramp up its bond sales to finance government operations. That on top of the trillion dollar budget deficit this year, next year and years to come.

Given the massive amounts of debt issuance, one must wonder if we are about to become another Zimbabwe experiencing hyperinflation. While the US Treasury, who is tasked to raise funds for government operations, doesn’t have the authority to say no to Congress, the Federal Reserve does. At what point is it the Federal Reserve’s responsibility to say to Congress we can’t print anymore money regardless of your desire to spend it? If the Federal Reserve did so, interest rates would shoot up due to the US Treasury attempting to meet the spending levels. Recently, I have begun to rethink the threat of hyperinflation due to all the wealth destruction over the past year.

[bestintxas]

Does anyone else think that issuing bonds only to buy them back is stupid?

Sorta like me sending out IOUs to people I know then buying them back with more IOUs, isn’t it?

[wastoute]

I read a freeper comment the otherday that I think predicts what will happen. He said that first we will have the deflation as the money velocity continues to slow and then as the gummint has to pay more and more to service it's (our) debt we will have hyperinflation. He said it "would be like a Tsunami" first the water flows rapidly offshore and then piles up as it races in to destroy everything in it's path. Very descriptive and I suspect very correct.

Μολὼν λάβε

[Jubal Madison]

“... and I suspect very correct.”

I also believe the description is correct. What I am not sure about is the severity - we are in uncharted waters. If we as a nation get our act together, we could get through this although it would be painful for an extended period. I do believe though, if we pass Cap and Trade and/or some form of nationalized health care - it will be game over. We will not be able to recover from that.

[Buckeye McFrog]

Does anyone else think that issuing bonds only to buy them back is stupid?

Sorta like me sending out IOUs to people I know then buying them back with more IOUs, isn’t it?

Congrats! I’ve never heard our fractional reserve banking system described so well!

[Pearls Before Swine]

Milton Friedman said that the true measure of the burden of government was spending, not tax rates. This is because deficit-caused inflation takes wealth from savers and transfers it to the government.

So, the government has an incentive to use inflation to rob savers so long as there is a significant pocket of untapped wealth held in financial instruments, and so long as it keeps the level of theft below the level which leads to electoral revolt.

I think this provides a decent explanation for the government’s frame of reference in setting its spending and fiscal policies.

[dscott8186]

It’s a rationalization, nothing more. It’s an elaborate shell game for domestic consumption to keep the public from discovering the farce which is being used to steal from them. Whether through inflation or wealth destruction, the elites run this society for their own ends and self enrichment.