Wednesday, November 2, 2011
Has inflation been caused by USA printing money?
I'm not certain we have a word for what's involved. When all this started banks had billions in ets on the books...on paper...but there was no real 'cash'. Most of the ets were 'money owed' or IOU's. After the collapse there was no 'cash' in the banking system and since the banks were now broke there was no credit in the system either. 'The government', the rock on which our 'capitalistic, market system is based could not allow the 'system' to fall to the level where the actual cash and actual available credit found a new equilibrium....in fact, at the time nobody knew where the bottom was. If the 'system' wasn't propped up there would be only minimum consumption, almost zero credit and because of low demand hardly any production. The 'true state of the market' would have been 'bupkis'. Unemployment would have been close to 50%, almost all of the banks would have closed, there would have been almost zero investment, the tax base would have vanished into thin air and nobody would have come out the winner for a generation. Enter the government: The 'government' created enough 'cash' to restock the banks...more cash was created to fund unemployment insurance. The 'stimulus' created demand for essential and some not so essential buying and selling. To some degree wages were paid, profits made, investments considered, savings established and taxes collected. Basically we didn't drop like a rock into a giant economic black hole never to be seen again. The banks probably should have been made a ward of the government so they wouldn't scam the system as we know they did, but politically the GOP/Teabag/Fox 'News' Axis would have gone nuts screaming about 'socialism'...the same way they did when the Obama administration propped up the auto industry...remember 'Government Motors'? The fact that a million jobs were saved and an essential industry was saved from death turned out to be all for the good. The GOP still doesn't want to acknowledge that this 'emergency socialism' saved the republic even if it did. Barack and even Bush did the right thing...we just don't want to admit it!
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