Interesting indeud…
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This is a good article but I want to argue point 3.
First. The treasury creates BONDS not cash. Central banks around the world store US bonds as well as cash (which gets issued by the federal reserve in exchange for bonds)
Also, just because they create more bonds and/or cash doesn’t mean inflation happens (at least not immediately). It doesn’t mean it might not later if/when money transfers from public (debt/bonds) to private (stocks) markets, but in a global market there is a huge demand for the US dollar simply because where else are people going to go if they have assets in trillions and they want to keep cash safe? The largest and most liquid market that they can go in and out of. As long as the dollar is reserve currency that will remain true. This is sort of like why gold is more than silver. The cost of storage is much less per billion dollars of gold than it is for a billion dollars of silver, so even though we’re on pace to run out of the above earth supply of silver much sooner, gold remains worth more than silver.
I do understand there is a strong basis for a theory that eventually that may not go on forever and shifts in capital take place so eventually it will “trickle down” and end up causing inflation in basic goods. That there also will be a shift in power at some point, particularly when a nation over leverages itself, but I think it’s far too simplistic to imply “money supply increases instantly manifest in inflation”.
@ derrr,
I agree, but over time the creation of bonds for reckless spending by congress does have an immediate inflationary effect.
That inflation is thre fold:
1) over time slow devaluation thus theft of savings
2) more M3 causes prices to rise in the fiat currency.
3)Certain individuals, institutions, etc. borrow money @ 0.25-0.50%
They use the money to buy treasuries.
Treasuries can be leveraged 10:1
That money is taken to forex, ftures, and commodities markets and leveraged gain 10:1
This has an exponential effect on price….but in this case both up and down.