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Printing Money is always a bad idea

Right now we have fallen through the looking glass. The United States Government is promising Trillions of Dollars in bail outs and so-called stimulus packages to avoid something that scares them to death - DEFLATION!

Dollars Once upon a time all western governments agreed that the most important thing to a nation's economy was to keep inflation low and under control. And so it is a shock to discover that right now these same nations and their top financial advisers are trying to find ways to create inflation and to avoid something that REALLY scares them - DEFLATION.

Personally I think that deflation gets a bad rap. It isn't simply about falling prices, it is also about printing less money so that money is worth more. What is wrong with that?

If you go down the other road - the one we are on right now - then the amount of money in the system is being increased dramatically and when you print all this money it actually becomes worth less until you get to the point of pre-World War II Germany when people were taking home their wages literally in wheelbarrows.

Perhaps the scariest thing of all is that I'm no economist and I get it. Our political leaders, our financial leaders and even our community organizers seem not to understand this very simply concept. money

Printing money doesn't get you more things - it just takes more of that money (because it is worth less) to acquire the same number of things.

Now while I already said that deflation gets a bad rap, it is important to understand the pitfalls of a deflationary economy to a nation like ours that lives on credit. If we hadn't have forgotten who we are supposed to be and continued to live within our means then there is no downside to deflation, but with the current debt carried by the United States it is certainly an issue.

Seventy percent of our economy is based on consumer spending and deflation actually encourages those with money to hang on to it - because the thing they want will cost less tomorrow and even less again the next day after that.

But - and this is important - deflation actually slows Government growth (always a good thing) and also holds back a further expansion of the welfare state. Through history, certain economies have shown great growth during deflationary periods.

We have a serious problem. The powers in charge do not wish Americans to save money - because if they did, then the recession would be much deeper and longer. They are printing money at an incredible rate. The Government has so far spent or pledged $5-trillion and that's without the new Administration's promise of another half trillion and without bailing out the auto industry! And perhaps most scary of all - without Social Security and Medicaid!

The deflation we are witnessing is debt deflation - and that is nearly impossible to reverse and that is also why the Fed Chair and many others are fighting like crazy to create enough inflation to put a major beat down on the big D.

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Simon Conway is the winner of the FIVE STAR Best in Client Satisfaction for Real Estate Agents in the Orlando area.

Please give me a call if you have questions about the Central Florida real estate market. You can reach me on 407 876 8200. Also visit my web site at www.simonconway.net or www.move2orlando.net

Posted by Simon Conway on 12/04/2008 01:49 PM

Comments (20)

Inflation in the Mortgage / Finance Channel

economy, world politics, inflation, deflation, simon conway selling homes in orlando and windermere

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20 Comments on Printing Money is always a bad idea

DEC

Simon I think they are scared of deflation because they don't understand it enough. Inflation is easier to understand.

I wish they would print me a couple of bundles. I'm sure noone would miss it.

I can only imagine how much worse it's going to get when the "new administration" is in place.

DEC

Hey I here Colombia is printing money for us as well, they can't get it here fast enough.

Simon - all this talk of flation.....seems like a lot of flatulance. thanks for an informative post.

DEC

Sounds like all these geniuses in Washington are just making the whole problem worse.

If they would leave things alone it would straighten out much quicker and in a healthier way.

DEC

I'm deflated watching all of this unfold!

Simon,

It appears that you understand the dilemma we are finding ourselves in.

DEC

I'm hearing more and more people - just regular folks like you and me - who are starting to get very afraid of the inflation looming as the next 'crisis du jour'. You simly can't dump $2 trillion or more into the economy without creating some ripples downstream. It may or may not create a positive result now (the jury's still out) but down the road there's likely to be hell to pay.

Hi Simon,

Great post - this is a very real problem.

I particularly agree with this, "The powers in charge do not wish Americans to save money - because if they did, then the recession would be much deeper and longer."

This is the reason I think that things are going to get ugly. People simply don't want to spend money any more - regardless of how much they have of it.

Never in the history of the planet has a nation - particularly one like ours - deliberately attacked its own currency. It could get very ugly.

Hey, no worries! Obama (BO) has a brilliant plan that he is going to implement right away so our troubles are nearly over. By the end of next month the economy will be rock solid, houses sales will skyrocket and we'll all be driving brand new, american made vehicles. We can all rest easy now.

DEC

I thought he'd at least get 100 days to get things in order. Now it's cut to 10 days?

Tchaka - the President elect is only one out of 100 who share responsibility for this. Everyone from the current Administration through the Congress are involved in the deliberate attack on our currency. If you can explain to me why any one of them thinks that is going to end well, then I'm ready to listen.

Simon - I don't know how this will end (though we both want things to end well). My comment was in reference to the comment before mine.

Tchaka - I recognize that and ignored that comment for obvious reasons. My central point however, remains the same. Everyone in power is on board with the attack on the Dollar. The deliberate destruction of our currency has to have an end game. The question is, what are they all on board with and which one of them will have the guts to inform the American people?

DEC

I say we move to Key West and think of the good old days. What do ya say?

Sounds good to me. I'll head there in the morning!

DEC

Don't forget to print some money for the trip.

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