Whackonomics

Column Intro: Allowing the Federal Reserve, a private gaggle of international bankers, to run the US economy by controlling our supply of money was the most whacked out (and unconstitutional) thing Congress has ever done. If you're wondering why things have gone haywire lately - that's the reason.

This column is a bi-weekly commentary on the lunacy of federal reserve policy and how it messes up your life.

So, you think economics is boring? You're damn right it is.

Reading about economics has about the entertainment value of watching your clothes spin in a dryer, but 'Whackonomics' is just the opposite. Why? Because it deals with finding truth in how people interact.

Whackonomics explains the lunacy of the way our economy is being run. Modern day "economics", on the other hand, tries to hide all of that under mountains of pseudo-scientific, pseudo-intellectual, statistical nonsense.

Because it's so tearfully boring, people like you and I are often only too happy to leave it to the "experts" - and that's why the experts think they have a license to mess it all up for us and line their own pockets while they're at it. They know we are not looking over their shoulders!

Whackonomics, on the other hand, is loads of fun because it shows these pointy-headed Fed bankers to be the exact kind of whack-jobs they really are: irresponsible, sycophantic dimwits with way too much power to mess up our daily lives. Naturally, as a result of having that much power, they always find ingenious ways to do exactly that. To combat that annoying tendency of theirs, we need to learn ...

The Big Secret

The big - and most well-kept - secret of economics is that it's actually easy to understand. Too bad that's not how they teach it to you in college.

This 'secret', and the key to understanding exactly what's going on in the economy, lies in (a) the way bankers create money, and (b) in how they make you not care about the obvious fact that this process is really, really dangerous.

However, once you understand how money is 'made' or created, you immediately understand why everything always gets more expensive over time. You know, it's that thing they call ... "inflation."

Here is how how bankers create our money:

Whenever you, anyone else, or any company, go to the bank to borrow money, the bank does absolutely NOT do what everybody thinks it does. The bank does not get the money from its vault. It does not use money other people have deposited in their various account. The simple truth is that the bank simply makes that money up, right then and there, on the spot, by having a clerk type a "credit" into the bank's computer and apply it to your account. The financial system then counts this "credit" as part of the domestic money supply.

Neat, huh? How would you like to be able to do that? Sorry, pal. No dice. That's called counterfeiting, and doing it can land you in jail. Only banks are allowed to counterfeit in our society, and the federal reserve is the country's top counterfeiter.

The Fed gets to make up the money Congress and other banks borrow from it, while the other banks get to make up the money you and other people and companies borrow. Guess why Congress liked that deal when the bankers presented it to them, back in 1913? The bankers promised Congress unlimited credit, while Congress allowed the bankers to play God with our money supply.

The bank makes it up, and you have to pay it back or you get "bad credit" and nobody will lend you money anymore. Oh, by the way, because you're just a regular schlob, you have to work to get the money you need to pay it back, while the bank just gets to type it into your account. Just like that.

Fair?

Hey, don't ask questions like that! After all, you get to spend the money and people will actually give you stuff for it - so what do you care? Just shut up and work.

What's the Problem?

Well, there's this little thing we call inflation. Nobody knows why it exists and why stuff gets more expensive all the time, but here is the reason: This process of money-creation constantly increases the country's money supply. The more money is available in the economy, the more prices for things get bid up. It's kind of like an auction. If everybody at any auction has loads of money and therefore doesn't care how much things cost, they will pay far more for them than they would otherwise.

This is what the eggheads call "monetary inflation." More and more money chases the same amount of goods, so prices go up. The rising prices are the result, not the cause of what people call "inflation." So, let's call that rising prices part price inflation from here on out, just so we won;t get confused.

Now you know exactly why inflation exists - and you didn't even have to go to college to learn this little secret. How about that?

Next week, we'll talk more about exactly how that messes everything else up in today's whackonomy.

Alex Wallenwein

Alex is the 'Whackonomist.' He is also the editor and publisher of the
Euro vs. Dollar Monitor, an online investment newsletter that looks at economics and investing from a saner point of view, while exposing the BS our elected and unelected officials dish up for us every day.