Tuesday, May 27, 2014


There had been more talk of monetary easing on the news too, but Bjorn had barely listened to it, stunned as he was by the images from Lier. However, once he turned off the TV he was left wondering what exactly the big shots were talking about when they used that expression. "Is it, whatever it is, really the cure all elixir that media is making it out to be?" he wondered. And given that he had about an hour on his hands before it was time to go down to meet his colleagues, he decided to make a quick search for it on the web.

The search yielded a series of similarly phrased results, basically confirming the media line. Monetary easing was simply a policy of low interest rates, coordinated from a central bank, with the aim to stimulate economic activity. The thinking being that low interest rates will encourage people to borrow in order to spend and invest, thereby creating economic growth.

"Fair enough," Bjorn thought to himself. "So that's what it means." But just as he was about to check on other things on the web, a link titled "Monetary Easing is Theft" caught his eye. And seeing that it pointed to an article on the same web site where he had read about the dubious link between the gold price and the health of the economy, he clicked on it.

"A contrarian view of the world is never a bad thing," Bjorn thought as he waited for the web-page to load, curious to find out what may lay behind the angry title. And once fully loaded, he was once again struck by the clear cut logic presented at the web site, which claimed to have as its mission to promote something called the "Austrian School of Economics".

The article simply pointed out the rather self evident fact that a central bank cannot in itself create wealth, since it does not produce anything but money. The money that it produces is therefore bound to have the effect of extracting purchasing power out of the money already in existence. And giving freshly printed money to any particular group, such as bankers and investors, can only have the immediate effect of transferring purchasing power from those who hold money already in existence to those receiving the freshly printed money.

The very act of printing money, for whatever reason, must necessarily transfer purchasing power to the well connected at the expense of the less well connected. And since monetary easing is a policy expressly designed towards the goal of extending fiat credit, which is the process in which money is created in the current system, monetary easing will always result in a transfer of purchasing power, and is therefore by definition theft.

The article went on to explain that the whole idea that such theft will create increased economic activity and growth rests on the assumption that those that benefit from the wealth transfer orchestrated through monetary easing are in a better position to create wealth than those loosing purchasing power. But with no net increase in purchasing power possible without increased production, monetary easing simply benefits a very small percentage of the population at the expense of everybody else, with the only result being that high end products and services, as well as financial assets, increase in price, thereby expanding the wealth gap between the top one percent and the rest of the population.

"Monetary easing is a centralized policy designed to move purchasing power in ways that voluntary human activity would never do. It is coercive and immoral, leaving ordinary people poorer than they would otherwise have been, while benefitting a small elite," the article concluded, adding as its final punch line that "monetary easing is theft".

Bjorn leaned back in his chair, letting the article sink in. "Well, this explains why asset prices are going up while ordinary people are struggling to make ends meet," Bjorn thought to himself with his eyes fixed on the distant shoreline across the Lundby bay. "However, it does not explain why the gold price is falling. With gold being a high end luxury product of sorts, or a financial asset, why does the gold price keep setting new lows?"

Once again, Bjorn had the feeling that he had been reading an overly simplistic explanation of a much more complicated mechanism. However, it was the only explanation he could understand. Nowhere else had he found a simple straight forward explanation to what was meant by "monetary easing" together with a simple to understand reasoning as to its actual effect on society.

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