Last week the Federal Reserve let us know that it would be passing out, altogether, about 1.2 trillion brand-new dollars. In related news, federal Homelessness Czar Philip Mangano said he sees an urgent need for allocating more money for housing and counseling programs for families, but stopped short of pointing out that we could just make that money up out of thin air, too, if we really wanted to.
What we need to ask ourselves as a nation, is, when do we want to invent new money, and when do we want to just stick with the old stuff we've been using?
Don't get me wrong; I'm not belittling imaginary money. On the contrary, I am saying it is so important that we can't leave the decision of who gets the imaginary money to the Fed and Ben Bernanke. The fact is that imaginary money spends just like credit card money, and we loves it, the precious, and we don't want Ben Bernanke saying only the investors whose phenomenal greed got us into this recession gets it.
How unfair is the current way of doing things? Well, let's see. If I take all the imaginary money the Fed is inventing, and I divide it up equally among all the men, women, and children of America, I get about $4,000 for me. Where's my $4,000? HEY, BERNANKE! WHERE'S MY $4,000?
OK, that wasn't very instructive. Let's look at it another way. The amount of money we're talking about, the new money being created out of thin air, is "worth" (in the spending of its imaginariness) slightly more than all the goods and services produced in the United States and its territories in any given month. So it's just like there was a time-space aberration, and a new month, Fakember, magically happened, and we all got paid as if it was any other month, and we all opted (out of the goodness of our hearts!) to give all our Fakember pay to our government to buy bonds of its own creation. Yo, if our government makes it up, it's ours. Because it's our government, sad to say.
I have the feeling I am not conveying my sense of panic well. So let's talk about the money supply!
The money supply is a fun fiction that calculates money held, like in a bank account, and money loaned on money held, both, even if it's "really" the same money, ha, ha, because we all loves the money, our precious, so we wants the amount of it as high as possible. So we rig the count high to make the most joy!
Anyway, just the U.S. money supply, held by U.S. residents, has been on the order of $10 trillion, until now. Remember, that's not how much money is actually in circulation in the form of bills and coins, that's how much money you get when you add up all the dollars people think they have in the bank or is otherwise owed them.
Now, for every eight fictional dollars, there's a ninth! Yippee! Nine of everything for the price of eight, all around! Lattes, yachts, CD players, you name it!
Wait, no, that's not for you, that's for the banks. Your money, which was already supposed to be in the bank, is being (indirectly) "backed up" by the new money, so YOU get exactly what you thought you had to begin with. YOU get the economy you thought was already yours, you made it with your own work, handed back to you. What does that sound like?
The banks will have to loan out most of the new money. Otherwise what's the point? That's what we mean by restoring your economy in this instance. They will then suck out old-money interest from you and your children, heretofore to be collectively known as "the debtors."
Which the banks will deserve because they worked so hard to get the new money made. Bringing the world's economy to its knees isn't easy.