It’s hard to believe that in the 21st century, educated people believe the government can produce real wealth by creating money. It’s especially ironic that the main preachers of this superstition fancy themselves progressives and are the first to accuse their opponents of being against science. What could be more antiscience than the alchemic proposal to create wealth by having the Federal Reserve make entries in a digital ledger? It’s more absurd than alchemy: Alchemists claimed they could turn base metals into gold. Inflationists require only thin air.
The commonsense reaction is: “Balderdash!” So it takes real devotion to the power of government to embrace such a ridiculous idea. Consider Chris Hayes, the MSNBC host. Last Saturday on his program, Up, he said this in introducing a segment on the proposal that the Treasury mint a $1 trillion coin to get around its debt limit:
The simple truth is it [the government] creates money simply out of thin air. Someone at the Federal Reserve punches in a number on a spreadsheet and — voila! — more money.... While there are rules that guide legal tender, at base, what makes money valuable is simply social convention, a norm. We all agree it’s valuable, so it’s valuable. The genius of the trillion dollar coin isn’t just that it provides some much needed leverage against a foe unencumbered by any sense of propriety, it also illustrates the uncomfortable, foundational reality of modern capitalism: money is nothing more than a shared illusion.
It’s a kind of magic. But is it good magic ... or bad magic?
At least he admits that in this case he believes in magic.
The value of money is a convention, a norm, a shared illusion? Did society agree that the dollar should lose 95 percent of its purchasing power since the Federal Reserve opened its doors nearly a hundred years ago?
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