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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Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

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