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.
Tags: Adjusted Monetary Base, Bank, Central Bank, Currency in Circulation, Economic Crisis, Economics, Economist, economy, Federal Reserve, Federal Reserve Bank of St. Louis, Fox, Germany, Glenn Beck, Inflation, Monetary Base, Money, Papiermarks, World War I