{"id":37442,"date":"2013-04-10T13:23:29","date_gmt":"2013-04-10T17:23:29","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=37442"},"modified":"2013-04-10T12:24:14","modified_gmt":"2013-04-10T16:24:14","slug":"why-money-printing-makes-you-poorer","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/04\/10\/why-money-printing-makes-you-poorer\/","title":{"rendered":"Why Money Printing Makes You Poorer"},"content":{"rendered":"

By Bill Bonner<\/strong><\/p>\n

We can barely catch our breath. We can’t stop laughing.<\/p>\n

Last week, Japan announced that it would undertake a bold and
\nradical experiment. After 23 years of on-again, off-again deflation,
\nthe new government decided it had had enough of things getting cheaper.<\/p>\n

The Bank of Japan will now obediently monetize debt until inflation
\nreaches 2%. This, the country’s central bankers believe, will encourage
\npeople to spend. The economy will take off.<\/p>\n

Why is it better for people to spend more tomorrow than they want to
\nspend today? Why is it better for prices to go up 2% than to go down
\n2%? Why is an economy that “takes off” better than one that sits calmly
\non the runway?<\/p>\n

Those questions will have to wait for another day; no one bothers to
\nask today. Economists say the secret to prosperity is to stimulate
\ndemand. Anything that stimulates demand is thought to be a good thing.<\/p>\n

It doesn’t seem to matter that this proposition is transparent
\npoppycock. People always want stuff. Demand is infinite. Government
\ndoesn’t have to stimulate it.<\/p>\n

What really matters is buying power. And buying power is limited. The authorities try to get around this problem by printing money<\/a>. Then, with this new money in hand, it is almost as though people had real demand!<\/p>\n

The Demand Delusion<\/h3>\n

But that’s what is so breathtaking and so funny about this time we
\nlive in. Who really believes you can increase demand… and make people
\nwealthier… by just printing up money? Who really believes you can
\ngive people more buying power by giving them more pieces of paper?<\/p>\n

Apparently, just about everybody! Ha ha ha!<\/p>\n

Real demand depends on real earnings, not more currency. People buy
\nthings by producing things. That’s “Say’s Law,” named after
\nJean-Baptiste Say. Buying power — or demand — comes from production,
\nnot pieces of paper.<\/p>\n

Economists and central bankers<\/a> cannot increase real demand. But they can sure move it around!<\/p>\n

Giving money to poor nations — foreign aid — does not make them
\nricher; it undermines local industries and makes them poorer. But some
\npeople get richer. Mercedes-Benz dealers in Africa noticed that
\nwhenever a new foreign aid program was announced, sales of their
\nhigh-end models shot up. The insiders knew they could skim millions
\nfrom the aid programs.<\/p>\n

Now, when new QE programs are announced in Japan, Ferrari sales shoot up. From Bloomberg:<\/p>\n

Registrations of Fiat SpA (F)’s
\nultra-luxury brand surged 40%, to 144 vehicles, in Japan last quarter,
\naccording to the Japan Automobile Importers Association yesterday.
\nThat’s more than twice the pace in the larger U.S. market, while demand
\nis slumping in China, at home and across Europe. <\/em><\/p>\n

The surge in demand for luxury cars
\nadds to signs that Prime Minister Shinzo Abe and Bank of Japan Governor
\nHaruhiko Kuroda are succeeding in reviving spending in the country.
\nStock prices are climbing back to levels before the September 2008
\ncollapse of Lehman Brothers Holdings Inc., and households have become
\nmore confident about the economic outlook. <\/em><\/p>\n

“The growth is very promising, and I
\nthink we can expect these super luxury brands to introduce more models
\nthat they hadn’t introduced to Japan before and to strengthen their
\ndealership networks,” said Yoshiaki Kawano, a Tokyo-based auto analyst
\nat industry researcher IHS Automotive. “The optimism for an economic
\nrecovery is spreading.” <\/em><\/p>\n

To sustain growth, Ferrari opened a
\nnew after-service facility in Japan this month, said Herbert Appleroth,
\nhead of the company’s operations in the country. <\/em><\/p>\n

Getting Poorer<\/h3>\n

When you print money<\/a>,
\nit’s like issuing new shares in a public company. The existing shares
\nbecome worth less than they were before… because each one represents
\nless of the total company.<\/p>\n

Likewise, the currency of a nation represents the goods and services
\nthat the nation produces. Print more currency and each unit will have
\nfewer goods and services behind it.<\/p>\n

But some people get the new shares… or new money… and are
\nricher. Everyone else may be poorer, but the people first in line for
\nthe free cash come out ahead. Economists and other dim observers look
\nat the increase in Ferrari sales with approval. Again, from Bloomberg:<\/p>\n

“It seems like demand is coming
\nback,” said Michiaki Ishida, a spokesman for the auto importers
\nassociation. “Some people are reacting to Abenomics, so the trend may
\ncontinue.” <\/em><\/p>\n

What the mainstream press doesn’t realize is that, although high-end
\ndemand goes up as insiders make wins from speculating on asset prices,
\nreal demand goes down.<\/p>\n

That’s because new money reduces the buying power of the old money.
\nExcept for the few insiders, speculators and sharpies who are first in
\nline to get the EZ money, everyone else gets poorer.<\/p>\n

Is that funny… or what?<\/p>\n

Regards,<\/p>\n

\"Bill<\/p>\n

Bill<\/p>\n

http:\/\/www.billbonnersdiary.com\/articles\/bonner-money-printing.html<\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Bill Bonner We can barely catch our breath. We can’t stop laughing. Last week, Japan announced that it would undertake a bold and radical experiment. After 23 years of on-again, off-again deflation, the new government decided it had had enough of things getting cheaper. The Bank of Japan will now obediently monetize debt until … <\/p>\n

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