Skyrocketing Money Printing Warns of Coming Inflation Disaster

I was watching the news earlier today, and Glenn Beck’s show on FOX News came on.  He was talking about the latest figures coming out of the Federal Reserve Bank of St. Louis,  specifically the figures on the monetary base.

Really quick, watch the following videos (or at least watch the first one.  The second one is the first time he showed the chart and isn’t quite as important, but if you have the time, watch both), courtesy of FOX News:

And the secone one

Now, at first I thought, that can’t be right – we can’t have started printing THAT much currency.  So I went to the Federal Reserve Bank of St. Louis’s website and started looking around.  And this is what I found.  The following is a chart of currency that’s actually in circulation (as in money that you and me have a chance of touching) (Note: if the chart is too small, click on it and it’ll take you to a full-sized chart):

But I thought, “That’s not the chart that Glenn Beck showed.”  So I did some more digging and found the chart that he showed, the chart tracking the monetary base:

YIKES!  That’s a very different chart from the first one.  And for those of you who don’t understand what the difference between monetary base and currency in circulation is, let me try to explain it.  Currency in circulation is the amount of money that’s going around the public sector, the money that’s floating around in the real world, paying for groceries or whatever.  The monetary base is the currency in circulation + money that’s being kept in a country’s central bank reserve.  In our case, the central bank is the Federal Reserve.  So to figure out how much is in the reserve, you simply have to do this math: monetary base – currency in circulation.  That means that most of that part of the blue line that goes almost straight up is in the Federal Reserve Bank (and there’s several branches throughout the country).  This is where private banks keep some of their money to loan to other banks.

Here’s a chart that shows how much is in the reserves:

Do you see how the  first chart and the last chart add up to the middle chart?  $800 billion-ish + $900 billion-ish gives $17 billion-ish.  Now, where that line starts to skyrocket on the middle and last charts is when the Fed decided to start printing more money and sticking it in the reserves.

That skyrocket devalues the currency.  The more  you have of something, the less valuable it becomes.  So, when something becomes less valuable, you need more of it to buy stuff.  And what’s the quick “remedy” for that?  Make more money!  But that DEVALUES the currency even more.  As Beck says in the second video (and as my history teacher said, and I’m guessing your history teacher too) this is what happened in Germany after World War I.  The Papiermarks in Germany became utterly worthless.  Hyperinflation set in and they actually started just stamping new values onto the bills.  You all saw the pictures in your Jr. High world history class of Germans burning paper money because it was cheaper to do that than buy wood.

Folks, if we aren’t careful, that is EXACTLY what is going to happen to us.  Look at the chart – this increase is unprecedented.  NEVER in American history have we done ANYTHING similar to this, and it’s a recipe for DISASTER.

We must stop this immediately and begin destroying some of that money.  The Federal Reserve needs to stop printing and start gathering money back.  When they begin bringing in that money (as they regularly do when money just becomes old), instead of replacing it with new money, some of this money needs to be destroyed.  The problem is, they get that old money from banks, and then give new money to the banks in return.  It’s very hard to take money away from people when you give it to them, but if we don’t do that, we’re headed for disaster.

I only hope that more people in the government realize what’s happening here.  Inaction is going to cost us severely, and “I told you so,” is of  little consolation, at least to me.

Done Ranting,

Ranting Republican
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9 Responses to “Skyrocketing Money Printing Warns of Coming Inflation Disaster”

  1. George Says:

    Hey! Keep up the ranting! Maybe some of the morons out there that are wrecking the economy will hear you. This is like cocain: One huge snort and you feel SUPER for a little while until your hear explodes and then you’re dead. …and from the looks of it, we better call the undertaker while we can still afford the phone line.

  2. inkslwc Says:

    Yeah, if I think my $40/month phone bill is ridiculous now, think of how ridiculous it’ll be when it’s $40,000,000/month!

  3. mfwic Says:

    Please take a look at the real measures of money supply, M1, M2 and MZM. Currency in circulation is just the paper money. Most of our money is kept in savings and checking accounts. These accounts dwarf the currrency in circulation and the adjusted monetary base. The adjusted monetary base is basically the monetary policy of the federal reserve. When the first $350 billion was released last fall that is the spike in the chart shown by Glenn Beck. Its not a secret or a surprise, but it’s also not alarming once you compare to the size of MZM. As of Jan 2009 MZM is ~$9 Trillion, which dwarfs the $350 billion spike in monetary base.

  4. inkslwc Says:

    You don’t see a spike during the 1979 bailout of Chrysler – this is something we’ve never seen before.

  5. Jamie Shafer Says:

    A young son used to collect – among others – used German postage stamps, and you should have seen the stamps’ values going up on copies of the exact same stamps. You could see how Germans had to spend millions of Deutschmarks for ONE stamp. It was a great lesson for a kid!

    Today Zimbabwe is undergoing terrible inflation, as have South American countries in the recent past. I hope if you have children and grandchildren as I do that you are talking about this inflation nightmare to them. And that you have written yo senators!

  6. Robert Says:

    Interesting article.
    But your fear makes me smile. The situations is actually much worse.
    You should know, that just about 5% of the money in circulation is physical paper that you can touch. What about the other 95% ?
    You are scared about the 2 trillion paper money?
    What about the debt ceiling of 11 trillion which was passed by the Republican Congress last year? Do you think that that 11 trillion is not money? And what about the other cumulated national debt (over 50 trillion)? You think that those numbers are in some other currency, not US dollar?
    All the money in circulation are just debt obligations which has to be paid back. And a small portion of that debt is actually printed for the people on the street.

    Look up some works about money creation and the Federal reserve.
    (I recomend Edward Griffin)

    Sorry if my english is not perfect, I am writing from Europe.

  7. The Inconvenient Debt: A Detailed Look at the Latest Monetary Base Figures « Summer55’s Weblog Says:

    [...] March 8, 2009 at 3:29 am (Uncategorized) http://inkslwc.wordpress.com/2009/01/30/skyrocketing-money-printing-warns-of-coming-inflation-disast… [...]

  8. Victoria Says:

    To Robert from Europe, if he ever looks at this blog again.

    Just for the record, in 2008, congress was controlled by democrats, not republicans. Democrats won control of the Congress at the end of 2006, so they controlled the purse-strings during the time you mention, not republicans.

    The republican president does not have control of the purse-strings, he can only sign a bill or veto it, since he does not have the authority of the line-item veto.

    Greetings from America!
    Victoria :)

  9. Grover Says:

    Hey, I think your site might be having browser compatibility issues.
    When I look at your blog in Safari, it looks fine but when opening in Internet
    Explorer, it has some overlapping. I just wanted to give you a quick heads up!
    Other then that, superb blog!

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