Dangerous Government "Printing" of Money

Steven LeBlanc

What we are seeing today is unique in history, never have so many nations, at the same time, given themselves over to the idea that the key to rescuing their economies lies in printing money and buying one another’s debt [bonds].

The world’s four biggest developed-market monetary authorities – the Bank of Japan [BOJ], the Fed [USA], the European Central Bank [ECB] and the Bank of England — are committed to returning their economies to health.

Spurring growth can include printing money or to be more accurate increasing credit in its own bank account with the stroke of a computer key. Only a Central Bank can “increase” money, they do this electronically.

If a Central Bank wants to increase money supply, it can buy government bonds—there are other ways. Many banks are involved in what is called Quantitative Easing. Quantitative Easing is when a Central Bank creates money electronically. In doing this they are increasing the bank reserves. The Central Bank uses these extra reserves to buy various securities, this may include government bonds and corporate bonds. Banks can sell assets [bonds] for cash—this increases the Bank’s cash reserves.

The hope is that when the Bank has more “cash” it will be more willing to lend to customers. This lending to customers will then result in people having more money to buy homes, cars etc. At least this is the way it is suppose to work.

The goal of Quantitative Easing is to increase bank lending, and this– it is hoped, will stimulate the consumer to spend more [as he gets loans, usually for business, from the bank]. But it doesn’t always work out as planned.

The Central Banks of the world are playing a dangerous game. Quantitative Easing flirts with inflation, and once inflation gets going it is very hard to stop. Rampant inflation struck Germany’s Weimar Republic in the 1920s and most recently in the nation of Zimbabwe. It could happen to us. Inflation is a hidden tax on every American, European and Asian.

The world financial crisis has led to the “printing of money”. Eventually we will reap what we sow. Do not be deceived: God is not mocked, for whatever one sows, that will he also reap. Galatians 6:7.

Flooding the world economy with money, governments buying more and more debt, all of this will eventually end badly. The timing of the next massive global financial crisis is impossible to predict but it is coming. Collectively, the world’s Central Banks have pumped over $13 trillion into the financial system since 2007.

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