Monday, August 8, 2011

Central Bankers and Money Supply

We are quite generous with criticism directed towards politicians, and for good reason.  However, we do admit that central banks/bankers do not receive nearly enough criticism and blame for our present condition.

On recent news of S&P downgrading the credit rating of The Divided States of Entitlement; Alan Greenspan has decided to weigh in with his infinite genius that "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default".  Yes, and if we increase the quantity of the money, does this affect the value of the money?  If prices are contingent upon a money supply being X, and central bankers double the quantity of money...... would prices stay the same?  No.  The price of everything would increase along with the increasing supply of money.  The value of the money would erode and decrease, and the cost of everything would go up accordingly.  Thank you, Alan Greenspan, as you now have even less credibility than before (now equivalent to the credibility of Andrea Mitchell).

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