[quote=Eugene][quote=sobmaz]
The newly created capital is used to buy necessities, necessities that are increasingly made in Asia.

Mr. Ching Chong, is lifted out of poverty producing what we now fail to produce for ourselves. Mr. Chong, takes his new economic freedom and buys MILK. Hey buys oil.

So, your average guy isn’t getting more, however more people now have the means to buy world commodities.

The situation is, we can now create infinite amounts of capital out of thin air, lifting billions out of poverty but mother nature just won’t cooperate with that infinite word.

Prior to 1972, capital formation had limits.[/quote]

That newly created capital is not used to buy anything. It is not in the hands of people who do any real buying. It never leaves the vaults of financial institutions.[/quote]

You have got to be kidding, right?

Let me spell it out for you.

The FED prints money and buys u.s. treasuries, keeping borrowing costs low for the Federal Government. The Federal Government, able to borrow at near zero rates, borrows for wars, stimulus and the reproductive cycle of the Duck Billed Platapussy.

When the Federal Government can borrow into existence trillions of dollars at near zero rates, that money makes it to Iraq for bribes, for Iraqi schools and roads. The Federal Government is able to extend unemployment benefits. The Federal Government is able to bail out Freddie Mac and Fanniea and on and on and on.

All this money begins circulating in the world economy and ends up in the hands of more and more people who then consume more and more commodities.

Where you get the idea newly created money doesn’t see the light of day, well, I think you have been listening to Ben Bernanke a bit too much.

A lot of smart economist disagree with you and Ben, and the ultimate truth detector does as well, which is Gold.