A picture is worth a trillion words…

 

Frankly I’m not surprise to see what the Fed is doing and can only imagine what this is going to look like if this bailout goes through.  There is a precedent throughout time that inflating the monetary supply only prolongs the inevitable.  This is a sad state of affairs and I see only troubled times ahead for the once mighty dollar.  Like the Romans who clipped their gold and silver coins the United States is creating more and more money from nothing.  Why do we need a bailout package when we can just print money?  It isn’t actually printed anymore, but issued through treasuries between the Fed, the Treasury, and private banks.  

We are headed towards a recession if we aren’t already in one.  Inflating the money supply while in a recession presumably means higher prices.  The contraction in prices we recently saw was perhaps a byproduct of the Fed contracting the money supply, which it has now reversed course.  During the Great Depression of 1929 many banks tried using their depositor’s money to help keep the market afloat just as the Fed is now doing… The outcome?  You know what happened…  

Now we are taking the opposite position and inflating.  What happened to Rome… and thanks to Mike Hewitt at dollardaze.org he lists many countries plagued by hyperinflation. 

• Angola (1991-1999)
• Argentina (1975-1991)
• Austria (1921-1922)
• Belarus (1994-2002)
• Bolivia (1984-1986)
• Brazil (1986-1994)
• Bosnia-Herzegovina (1993)
• Bulgaria (1991-1997)
• Chile (1971-1973)
• China (1939-1950)
• Free City of Danzig (1923)
• Ecuador (2000)
• England
• Greece (1944-1953)
• France (1789-1797)
• Georgia (1995)
• Germany (1923-1924, 1945-1948)
• Greece (1944-1953)
• Hungary (1922-1924, 1944-1946)
• Israel (1979-1985)
• Japan (1944-1948)
• Krajina (1993)
• Madagascar (2004)
• Mexico (2004)
• Nicaragua (1987-1990)
• Persian Empire (1294)
• Peru (1984-1990)
• Poland (1922-1924, 1990-1993)
• Romania (2000-2005)
• Ancient Rome
• Russia (1921-1922, 1992-1994)
• Taiwan (late-1940′s)
• Turkey (1990′s)
• Ukraine (1993-1995)
• United States (1812-1814, 1861-1865)
• Yap (late 1800′s)
• Yugoslavia (1989-1994)
• Zaire (1989-1996)
• Zimbabwe (1999 – present)

The fiat money system that we presently have, which in its present form has only been in existence since 1971 when we went off the gold standard.  To say that we have a precedent for what may or may not happen is incorrect.  We are now in uncharted territory, however history has its lessons.