By Clint Siegner
Central bankers and politicians love inflation, but they need “bag holders” to have faith in the value of the fiat currency IOUs they hold. The trick is to avoid suddenly destroying the ephemeral confidence in currencies by printing too much too fast.
Central bankers may also need to limit the options inflation wary citizens have for escaping.
They are both shifty and innovative when it comes to making sure the ill effects of perpetually devaluing currency are primarily borne by the citizenry.
Lying and trying to hide what they are doing to the currency has been tradition with politicians since Roman times. Nero began quietly reducing the silver content of the Denarius around 60 A.D.
Today central bankers and governments don’t have to bother with altering physical coins. Every currency can be quietly devalued electronically.
The financial central planners try to calm the herd with rigged inflation statistics designed to show the money losing purchasing power far more slowly than it actually is.
They use “hedonic adjustments,” “geometric weighting,” and many other ploys to arrive at a politically palatable inflation rate. Or, even more clever, they convince investors the best way to evaluate the strength of the money is simply to compare it with other fiat currencies.
That is how the U.S. dollar has earned its reputation for “strength” in recent years.
Headlines in the financial press broadcast the DXY index is rising. The dollar buys more euros and yen, which matters to practically no one except tourists. Meanwhile, it buys far less of stuff that does matter — food, housing, and most everything people need to live.
Another trick is for politicians and central bankers to simply print money under the guise of economic imperative.
The 2008 bank bailouts, the Fed program to buy toxic mortgage securities at par value from banks and the trillions printed to buy U.S. Treasury debt all fit in this category.
The “inflationistas” running our monetary system aren’t done innovating either. The International Monetary Fund (IMF) recently published an article on how to implement “negative interest rates.” Officials want banks to be able to charge depositors for holding funds in checking or savings accounts.
The problem, as they see it, is that many depositors probably won’t be willing to pay bankers for holding their money. They would withdraw deposits and put cash under the mattress instead. The IMF officials lament:
When cash is available, however, cutting rates significantly into negative territory becomes impossible. Cash has the same purchasing power as bank deposits, but at zero nominal interest. Moreover, it can be obtained in unlimited quantities in exchange for bank money. Therefore, instead of paying negative interest, one can simply hold cash at zero interest. Cash is a free option on zero interest, and acts as an interest rate floor.
The solution to this “problem,” they say, is moving to a cashless society. And there is a deliberate scheme to do so.
The first step is to take away the ability for people to make cash withdrawals.
The IMF officials exhibit no shame, casually suggesting the freedom for untold millions of people around the globe to save be eliminated. If savers don’t spend what they have, officials will make them pay.
The bureaucrats who authored the IMF blog aren’t the first to propose abolishing physical cash. Bankers and politicians have been waging the War on Cash for years now. This wish to implement negative interest rates is just one more on a list of reasons these central planners hate cash.
To them, ordinary people are sheep to be herded. Anyone who wishes to avoid being shorn should hold real assets outside of the banking system.
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Clint Siegner is a Director at Money Metals Exchange, a precious metals dealer recently named “Best in the USA” by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.
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