Where's The Money Coming From? -- Part 2

 

At the end of the First World War, two important things happened: the Spanish Flu, and the Treaty of Versailles.  The first killed 50 million world-wide including 675,000 in the U.S. alone.  The second imposed ruinous economic conditions on Germany such that the Weimar Republic resorted to printing money so fast that inflation made all of it worthless.  You may recall stories of harried Germans trying to buy bread with a wheelbarrow full of Deutschmarks.  It's a crap-shoot at this point whether our own Chinese Coronavirus will kill anything like 50 million world-wide, but there is absolutely no doubt that printing 2 trillion (with a 'T') dollars with nothing to back it up is going to cause inflation of the U.S. currency.  How much inflation?  I have no idea, and neither does anyone else.  It is, however, a fact you can take to the bank that prices are going to rise because 2 trillion more dollars are now chasing the same amount of productivity.  Less productivity, actually, because many otherwise-productive businesses have been shuttered by executive fiat.

Amazingly, everyone seems 'OK' with that because the 2 trillion is going to be distributed more-or-less evenly across the population.  Did you catch that?  Everyone is going to get approximately the same benefit from the Mint printing all those dollars.  No one is going to be treated any better or worse than anyone else.(**)

The geniuses in Washington just did a 'stock split' on the cash in your wallet, in your savings account, in your IRA, and everywhere else you had stored your accumulated wealth.  In a stock split, you get more shares of stock, but each of those shares is less valuable than they were yesterday.  Everybody thinks "Oh, boy!  I'm getting $1200 bucks!"  Unfortunately, what you had yesterday plus the $1200 bucks now has, together, the same value as what you had yesterday.  Or less.

You've just been played.

Again.

 

 

(**):  This is not exactly true because as part of that massive 'stimulus' package, a lot of non-productive recipients are also going to get a pile of cash: various arts organizations including The Kennedy Center ($25million), and the all-time record-setting least-productive part of the economy, the U.S.Congress ($39million).

Yes, indeed, you've been played.