Central Banks Gain Enormously When They Print The Money First

In this interview with Future Money Trends, Bud Conrad (Chief Economist at Casey Research) comments on several aspects of the economy and monetary system. This is what he had to say about the global race to debace (currency war).

Across the planet, the central banks have all agreed they are in a race to debase. They are trying to decrease the value of their currency, and they say that it’s good for us because it will increase the ability of a country to export, since the cost of manufacturing decreases in competitive world terms when they destroy their own currency. Therefore, there may be some more investment, and people will keep their jobs. But look, that means everybody in the country, where they have most of their assets denominated in that currency, gets poorer, because the currency is worth less!

The idea that you want to destroy your wealth is patently upside-down dumb and insane. Now how they get away with doing this is amazing.”

“In deflation, to a debtor, their debts are denominated in a higher value of the currency and therefore have to pay back more. I do fear however that we have dislocations from significant inflation. The central bankers have told us that it is good for us. How is that possible; it is not good for us. What is a central banker? It is an arm of the government with a strong bias to help and support the banking system. If you have the printing press you can let it run for yourself, the governments and the banks. Central banks gain enormously when they print the money first before anyone else get inflationary losses which is exactly a hidden tax on everybody’s bank account in dollar denominated value. It is like raising taxes without raising taxes. The central bank is telling us it is good for the economy, it will improve unemployment. In fact, it will make themselves and the bankers able to continue to kick the can down the road one more time, keep the system going at the destruction of uneducated, unaware people. The general public does not understand that the government’s arm is not there to help them.”

Think about it: can printing money (which is nothing more than electronic bits and bytes) create wealth in a country?

What happens if the US Fed would go “back to normal”

“Our government cannot afford the rise in interest rates that would occur if we got back to normal. We’ve been at zero short-term rate for years. It should be 3 or 4 percent. Longer term rates should be another 3 percent, maybe, above that. A 6 percent rate is sort of the average of what we had post-war. At 6 percent, rather than 1 or 2 percent we’re now at, that’s triple what we now are, our interest payment on our outstanding debt, which is now 16 trillion, but by then will be 20 or 25 trillion, goes to absorb almost all the tax revenue that’s available. It doesn’t work.

Similarly, if you add in the retirement benefit requirements of baby boomers, the expected trajectory of 100 trillion dollars of present value future liabilities on the books, it doesn’t work. This disaster is on track. There is nobody able to take it off track. I don’t see a fix in Washington to austerity or screwing old people. Excuse me for [laughter] making things difficult for older people. I do think that the collapse of currencies worldwide in the next three years is on track.”

What could happen after the next big crisis?

“A new U.S. dollar. It seems to be, with a new promise of some sort, that this time, they won’t really debase it, create inflation that runs out of control, but will keep pushing, an honest time. But it’s what was done in Argentina about six times, in Brazil, in Peru, just everywhere, all the former communist countries, most African countries, we have the second oldest currency in the world. The US, Most Americans, don’t realize that it’s normal for a government to get overspent, fall apart, and have to issue new currency.”

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