Money Supply

I will here combine two items, each on either side of the scale for you to weigh them, or perhaps to add something to the weighing platforms.

The first is this article about Money Supply:

Pay closer attention to this section:
The main functions of the
central bank are to maintain low inflation, and full employment. The U.S. Central bank may attempt to do this by artificially stimulating demand by affecting the nation's money supply via lower (or higher) interest rates. Furthermore, deficit spending on the authorization of the U.S. Government is designed to artificially stimulate aggregate demand for products and services within an economy.
Another means, of stimulating demand would be changes in both consumption taxes, and personal income taxes. The argument for either, as per the efficiency to which the additional dollars are being utilized, would determine their overall effect on the GDP of a nation, and whether or not a sustainable stimulus is in effect. For example, a dollar given to a tax-payer (tax credit) for purchases of products or services (stimulating monetary velocity), versus a dollar given to an additional construction laborer - infrastructure redevelopment (for example, also stimulating monetary velocity).
The main debate amongst economists in the second half of the twentieth century concerned the central banks ability to predict how much money should be in circulation, given current employment rates, and inflation rates.
Some economists like Milton Friedman believed that the central bank would always get it wrong, leading to wider swings in the economy than if it were just left alone.[26] This is why they advocated a non-interventionist approach.
Chairman of the U.S. Federal Reserve,
Ben Bernanke, has suggested that over the last 10 to 15 years, many modern central banks have become relatively adept at manipulation of the money supply, leading to a smoother business cycle, with recessions tending to be smaller and less frequent than in earlier decades, a phenomenon he terms "The Great Moderation" [27]
However these assumptions may very well prove ill-conceived by the ongoing financial/economic crisis of 2008-present. History will judge whether or not the now classical thinking of interest, and money supply moderation, have proven effective in preventing recessions, severe or mild. Furthermore, it may be that the functions of the central bank may need to encompass more than the 'jigging' up or down of interest rates in order to influence money supply, in the sense that these tools, although valuable, do not in fact control the very volatility, nor directly the velocity, of money supply in a nation's economy.

I ask, how can an institution that (apparently) does nothing except increase the money supply moderate inflation? Bear in mind that inflation is not "increasing prices". That is only the effect of inflation, which is truly the increase in the supply of whatever is used as money.

Now in the other scale, these quotes from "Meltdown" by Thomas Woods:

Virtually all analysis of the economy today... takes for granted that regulatory tinkering is all that is needed to patch up an otherwise sound monetary system. To the contrary: the system itself is the problem, and the sooner we cast away the foolish web of superstitions that stand in the way of serious productive discussion of the issue, the better off the American people will be...

Over the course of history, societies have most often chosen gold and silver as money. Soon enough, governments decided they wanted a piece of the action, and kings and other rulers began to stamp their faces on the coins and monopolize the production of money. This, their people were led to understand, was a rightful attribute of sovereignty to which their leaders were entitled… what government monopolies on money production actually meant was that the rule could now loot the population by clipping the coins and debasing the currency, inserting some amount of base metal into previously pure coins and pocketing the difference himself…

Paper money suite governments rather better than coins of precious metal, since they could enrich themselves and their friends without arousing the suspicions and public hostility… It was also easier to blame scapegoats—wicked businessmen, speculators, and the rest … of people the population is taught to hate—for the rising prices that paper-money inflation caused…

Governments tend to oppose monetary systems based on precious metals because they impose restraints on ambitious politicians. Gold cannot be infinitely reproduce [ie you cannot just whip out $2,000,000,000,000 (trillions) of gold to finance a war or “stimulate” the economy] as can paper money. Even if paper money is used under a commodity standard, the paper is a money substitute that can be converted into the commodity whenever people demand it… Not surprisingly, government prefers a system in which the paper money cannot be redeemed into anything. Then it can increase the supply of money without restraint.

Unable to print all the money it wants, government under a commodity standard must resort to borrowing or taxation, both of which are more obvious and meet with sterner resistance than the silent means of inflation…

--p 110-114
This power, to create fiat money, is a sort of One Ring that binds all other issues to it. Notably the power to make war, an incessant string of wars, and to enrich or enslave individuals or segments of the population by suppressing or expanding their economic activities.
What do you think tripling the money supply is going to do?
I do not pretend to understand all of these matters completely. I am a political explorer. I am sharing with you my discoveries.
If you have something to add, please email me at I am interested in getting additional facts and insights.



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