You can do it fast and loud, or you can do it slow and quiet. The US Government is doing Cyprus slow and quiet, but if you pay attention, you can realize that the man behind the curtain is punishing thrift as well as success while rewarding failure and sloth.
There are more sophisticated ways for governments to take what you have put aside for yourself and use it for whatever the politicians feel like using it for. If they do it slowly but steadily, they can take a big chunk of what you have sacrificed for years to save, before you are even aware, much less alarmed.
That is in fact already happening. When officials of the Federal Reserve System speak in vague and lofty terms about "quantitative easing," what they are talking about is creating more money out of thin air, as the Federal Reserve is authorized to do -- and has been doing in recent years, to the tune of tens of billions of dollars a month.
When the federal government spends far beyond the tax revenues it has, it gets the extra money by selling bonds. The Federal Reserve has become the biggest buyer of these bonds, since it costs them nothing to create more money.
This new money buys just as much as the money you sacrificed to save for years. More money in circulation, without a corresponding increase in output, means rising prices. Although the numbers in your bank book may remain the same, part of the purchasing power of your money is transferred to the government. Is that really different from what Cyprus has done?
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Surely you don't mean the POTUS when you say the "man behind the curtain." POTUS does not control the Federal Reserve outright.
ReplyDeleteThe executive sets the policies, the Fed COULD act against the policy, but is not doing so. The current policy of both the WH and the Fed is to debase the currency through large deficits and low/zero interest rates + printing money. Which has the same effect as just taking money out of your bank account.
ReplyDeleteThe Fed doesn't have to be a sock puppet, it just currently is.