Monday, March 23, 2009

Monetizing the Debt

I just read the treasury's plan. Details are murky, but my overall takeaway is that the treasury is committing between 500,000 million to 1,000,000 million to be given to investors, and those investors will act like everything is normal and buy the stuff that nobody wants. The idea is that only markets can set prices effectively, so they'll let the market do that part while they basically fund the whole thing. I can understand that logic, but I wonder what effect free money will have on the price that the market sets? Surely they can't expect investors to be as cautious as they would be if they were investing their own money, and that must lead to over priced assets. bah.

As I was reading Geitner's statement, i was looking for signs of fascism (eg, private ownership, public control). What came out sounds like exactly the opposite: public ownership and private control. Of course, the catch is that only they very wealthy and politically connected will get to share in that control... so what's the name for that? Plutarchy? Oligarchy? Its crazy.
On top of that, the fed announced over the weekend that it is directly committed to monetizing a substantial portion of all this spending-debt. That is: the Federal Reserve is buying treasury notes. The government is buying government promises to pay money later. With what? The money they print. What does that mean? Deliberate inflation. What can we do about it? Buy something with a finite supply that cannot be devalued, like gold.

In other news, the US mint has stopped issuing gold coins. You can still buy bullion elsewhere (for now), but I'm not exactly sure about the best ways of doing that and protecting it. Rest assured I'm going to find out very soon.