Monday, September 17, 2012

Bernanke and the Illusion of Wealth

On the September 15, 2012 edition of the US Farm Report on RFD TV, John Phipps talked about the FED decision to create $40 Billion a month from nothing to buy our home mortgages. In discussing the event, he states what he called the short version of Bernanke's public announcement in the preceding week, then Mr. Phipps adds his own analysis.
The short version: "We're going to worry about inflation once we gets jobs back, not before."
This is very good news, I think. If our whole economy could pick up steam, the possibilities that open up to ag are enormous.
You can see his comments the video on the page, shortly after the middle of the program. 

I sent the following email to Mr. Phipps that same day.

Mr. Phipps,

On Saturday September 15, 2012 you mentioned the FED's decision to create more new money as being a good thing for agriculture. This thinking is hailed by conventional wisdom as sophisticated and smart, yet it is objectively illogical and based on measurably false assumptions. It is especially shameful for people who are involved in agriculture to be confused about the effect of any government interventions, especially the act of creating new money from nothing.

If we are to prosper again in agriculture, or as free people in the US, we must stop government interventions on all fronts. In few words, I explain it in this way:

Have you ever noticed that people eat food and use things? Food and things must be produced. Government produces nothing, wastes much and interferes with production. Therefore every promise made by government has to be kept by a producer. Government intervention makes us all poorer than we would otherwise be.

The only way for anyone to increase wealth in the current system is through wealth transfer, not wealth production. The American producer provides the wealth to those at the top of the system. Bernanke cannot produce wealth with entries in a ledger. He can only transfer it.

My question to you is this: How does the creation of new money, which today is simply an electronic ledger entry, add to the wealth of a nation or individual?

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