All Money Printing Schemes End Badly

By: GE Christenson

William H. Gross (manages the largest bond fund in the world – PIMCO) has much to say about Quantitative Easing and money printing. His latest article, Money For Nothin’ Writing Checks For Free, discusses Quantitative Easing (printing money) and the inevitable consequences. He notes that central banks have printed over six trillion dollars in the last few years. This begs the question, “Why not print even more?” Mr. Gross and many others have suggested that central banks should be hesitant with money printing schemes since they tend to end badly. He also quotes Sir Isaac Newton regarding the temporary success (and subsequent crash) of the English government’s money printing in the early 1700s South Seas bubble, “I can calculate the movement of the stars but not the madness of men.”

What about the madness of men? Do YOU really believe the following are true?

• Congress can NOT reduce spending! (Would the deficit be eliminated if members of congress lost their salary and benefits every year the government overspent revenues?)
• We can solve an excess debt crisis by creating more debt! (Will vodka also cure alcoholism?)
• Printing money (QE4Ever) will create economic prosperity! (It creates wealth for banks, but not for the economy.)
• More government, at much more cost, will improve the economy!
• 47,000,000 Americans on food stamps (SNAP) indicates a recovering economy!
• Paper money will always have value and will always be accepted in payment for real goods! (History indicates otherwise.)
• Loaning money to an insolvent government at about 3% per year for 30 years is a good investment when the government has assured us that it will devalue the dollars used to repay the loan!

What about the sanity of men? Is it more sensible to believe the following?

• YOU can control your finances, wealth, and retirement.
• Gold is real money.
• Physical assets are safer than paper assets or digital “money” on a computer server. Avoid the train wreck.
• Gold will retain its value, dollars will not.
• If you own physical assets, you have less need to trust the safety of the stock market or the bond market.
• Physical assets are much less vulnerable to the actions of central banks, the “Plunge Protection Team,” High Frequency Trading, and other market manipulations.

Conclusion

“A man sees what he wants to see and disregards the rest.” Simon & Garfunkel

If the government needs money for excessive expenditures, it sees loans and a central bank that “prints money” and disregards the inevitable inflation.

If a bank sees huge unrealized losses on mortgages, derivatives, and mortgage-backed securities, it sees bailouts from the Federal Reserve along with lobbyists purchasing favorable legislation and disregards the economic cost to the nation.

If an aware individual sees unbacked paper money being printed in quantity, he buys physical assets such as gold and silver and disregards the continual media noise and nonsense.

Avoid the madness of men, and seek the safety and sanity of gold and silver. We have been warned.

GE Christenson
aka Deviant Investor