(Read part I here.)
Money printing does generate tremendous income for Wall Street “fat cats”. Such income, however, is more than off-set by the loss of working people. Money printing is thus the most vicious redistribution of wealth. It has been always the instrument for financial tycoons and corrupted politicians to accumulate wealth. History has repeatedly shown this. You do not need to look back very far to discover this truth. As recently as in 1940, the huge scale of money printing in China generated mountains of wealth for financial tycoons and corrupted politicians.
For real world people, it is a simple common sense that wealth does not fall from the sky. It has to be produced. It is beyond me that such an obvious truth is so difficult for elite economists to comprehend. This is largely because they just sit in the ivy tower, imagining the magic golden touch such as monetary and fiscal policies, mocking practitioners. They are so ignorant and arrogant.
The problem goes even beyond ignorance and arrogance. Elite economists understand clearly that demand relies solely on income. And income means production. Given this premise, the only logical conclusion regarding the cause - effect relationship between supply and demand is that it is the former that drives the latter, and there can be no other way around. Yet they have still been obsessed with the idea that demand can be created to haul supply without supply being produced in the first place. They are not only arrogant and ignorant, but also incapable of logical thinking. Unfortunately, they have long dominated both economics study and economic policy making, cultivating fools like themselves and causing disasters after disasters.
I understand that what I said above need a theoretical explanation. But such an explanation cannot be properly provided in such a short letter. I will be more than happy to elaborate for you in some other places, if you so desire. Despite this drawback, however, what I have said is entirely supported by facts and therefore not invalid, to say the least. As indicated earlier, the worst sort of economic inequality has been created. Not only that. An assets bubble is forming, if not already formed. Inflation will eventually occur, as the prices of commodity reach the point at which businesses cannot survive without raising prices. You do not want to see such inflation. Businesses cannot survive without increasing prices. By increasing prices, however, they will be committing suicide. That will cause horrible inflation and vast unemployment. This is why Churchill said inflation was worse than Stalin. Does such perspective concern you a bit? It is incomprehensible for me that there are such economists and policy makers who could be so foolish as to rely on money printing to pull the economy out of recession.
It is incomprehensible for me as well that elite economists and policy makers such as you never look at policy effects. You just blindly believe in mainstream economic theories. The famous Philips Curve perhaps best exemplifies this blindness. The Curve suggests that there is a trade-off between inflation and employment. This suggestion has been long proven phony by the stagflation during the 70’. But obviously you are still faithful of it. It is already bad that you lack the capacity to question and challenge main stream economic theories. That is still understandable, given your education background and narrow mind. But how could you ignore policy effects? Is it a basic scientific thinking that a theory is proven untrue if its prediction fails just once? Any medicine has side effects. No medicine shall be used without its benefits surpassing its side effects. A physician will stop the medicine he prescribed for his patient if it fails to deliver expected results. You are clearly aware of the side effects of money printing. Yet you have been continuously applying it without seeing any desired results. Can you call yourself a responsible physician?
It appears that none of real world experiences, logic and facts can have impact on your mind with respect of money printing, given that you have no intention to stop it. The only thing left for me to appeal to you is your conscience. I am actually a beneficiary of money printing. The price of my house has been more than doubled in just a few years. That, however, cannot make me happy, not at all. This is because I feel for Main Street people. I feel for them for I myself use to be one of them. For a long period of time, I earned just above minimum wage. Such low income, however, sustained not only my living, but also my education. This kind of life is tough. However, I have neither complaints nor regrets. I am proud of myself for having maintained dignity. I do not blame my employers either. They tried hard to pay me as much as they could. The point here is that such achievement is impossible without low and stable prices of necessities. Now, so many Main Street people are struggling, not for a better life, but for a life not worsening, thanks to money printing. You cannot deny this effect of money printing. As such, if you still have conscience and you are genuinely concerned about low-income people as you said you are, you must stop money printing immediately, not only the purchase of the treasure bonds, but also all lending, especially the ones with near zero interest rates. Anything short of that will disclose your true color: a dog running amongst Wall Street “fat cats”.
Sincerely Yours,
Xiaolin Zhong
Tags: Fed, Fed chair, Janet Yellen
