Bubble In Paper Money

Nothing much to say today. Stocks still going up. Gold still dilly dallying.

Gold is waiting to see what happens. Japan and the US are pumping up the money fast. But the European Central Bank has let its base money decline.

Result: slightly less global paper money…and a slightly lower gold price. Seems logical. Sensible. Gold is the world’s alternative money. That and Bitcoin. The supply of paper money goes up…and you get more paper for each unit of gold. That’s just what you’d expect.

But the pundits are sure the end of the gold bull market is at hand. Who knows? Maybe they’re right. But it seems more likely that when the Japanese get their presses running hot the price of gold will resume its upward climb.

Or, looking at the big picture, the central banks of the world have decided that money printing is the solution to low growth and high unemployment. Unless something happens to stop them, they’ll probably keep increasing the money supply. And the price of gold will probably keep going up.

But we’re still laughing at the Japanese…and Ben Bernanke…and economists and central bankers everywhere.

And at ourselves! We all do the damnedest things.

Remember the dotcom bubble? People thought they could get rich by buying companies with no earnings…no assets…and no business plan that had ever been tested. They invested billions of dollars in these companies.

And when we pointed out that the whole thing was loony…they said we ‘didn’t get it.’

As it turned out, we were happy not to get it.

Again, we didn’t get it. How could an inanimate object…that needed constant maintenance and attention…increase your wealth? Houses were consumer items…not capital investments.

And again, it turned out that not getting it was a big advantage. So you’re probably wondering…what is it that we don’t get now?

We’ll tell you. We don’t get how printing money can make people wealthier. It never did in the past. Instead, it just led to higher inflation, bankruptcies, riots, revolutions…and disappointment.

Not that we have a closed mind about it. If someone could explain how printing up pieces of paper makes us more prosperous we’d be all for it. We’d want more of it. Heck, if one or two trillion makes you wealthier…why not print up ten quazillion?

Wait a minute. Didn’t Argentina try that in the ‘80s? Didn’t Brazil give it a whirl in the ‘90s… and Zimbabwe in the ‘00s?

We don’t remember any of them getting richer. Instead, they got poorer. So, what’s the magic that Ben Bernanke and the Japanese have discovered? What’s the secret?

There may be one. Anything’s possible. But what is it?

Until we get a good answer…we’re going to keep laughing.


Bill Bonner
for Markets and Money

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Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail Markets and Money.
Bill Bonner

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2 Comments on "Bubble In Paper Money"

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small cap
Glad you are finding it funny Bill, just had a chap on CNBC from Goldmans and like me (and you) he couldn’t understand why gold was not going up with with the money supply. Didn’t even try. One way or another they will write about this for years to come. Trouble is, I dont think they will be writing about it because it worked! I dont think i will ever see the like again. They (the faceless central bankers) seem to have the world fooled, trouble is, every time i switch on the the business channel, there they all are… Read more »
slewie the pi-rat

possible answers include:
a) world currency
b) cabal of print-freaks in 27 flavors
c) centralized command by aliens

some moron with a mike and a camera asks the chairSatan WTF he is thinking sending the FED minutes out in secret e-mails to people who can legally trade the information, BEFORE the public release.

and benzelbub responds: “This is what we call the trailing edge of the FED’s ‘openness’ campaign. The PPT gets it even earlier.”
~from deToke-deVille’s “Fascism in America”

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