“Actually, the reverse is true. If the Fed doesn’t print money, then our economy collapses and renders our currency worthless (or close to it).”
There is a difference between money creation via debt and money creation via printing. We currently create all or the vast majority of the money supply via debt. From what I have read straight printing severely devalues in way that differs from debt created money and on a philosophical level it should. See Zimbabwe for and example. This is where I get lost in the abstract chicanery of our monetary system and have never been given any clarity on the specific difference of each form of monetary creation. Either way we are caught in a severe deflationary cycle of a system the is almost 100% dependent on growth and specifically growth of consumption to pay off the debts and not default. I’m quite sure there won’t be enough new debt issued to keep up with defaults so we will see affects of straight printing to attempt to keep it going.
And behind the scenes to make matters even more confusing is the much understudied interlinking between money and energy. There are a few ecological economists that are studying this. Being that energy or more specifically oil is real and fiat is not, I can only conclude that the peaking of world oil production will have a profound affect on the way we create and think of money. Oil has been pretty much free for most of the of industrial civilization just like our money. However, you can’t print oil which is the true underpinning of our currency. This current bumpy plateau of oil production is scheduled for terminal decline by 2010-2012. This illustrates another flaw in the system. Oil just plummeted in price and depletion marches on. Sub $70 kills many alternative projects. We are ill prepared for starting the end of the oil age and the market is not coming to our rescue. Invisible hands and infinite growth on a finite sphere. Nonsense, it’s faith based economics and I’ve lost mine.
IMO, another fundamental flaw is that the whole thing is based on perpetual growth of money and population on a sphere with finite resources. In resource constrained world, this is where capitalism becomes cannibalistic and the web of multinational corporations and financial institutions morph into Global Corp as the mountain of debt comes crashing down. Just look at all the mergers and defaults.
Interesting times we live in. Dogmas and ideologies are going to get turned on their head.
