Monday, October 17, 2011
While listening to the news reports about Greece's labor unions striking, in response to the cuts in funding because of the austerity requirements, I wondered where the notion began that bailout money was free money. Money that was simply available for the asking. Money that could be used to fund business as usual with no strings attached. That all you really needed to do is demand or strike for more. It seems to me that it all began with the advent of the Federal Reserve Bank and its eventual practice of routinely expanding the money supply. A practice not based on supply but demand. Not founded on income but expectation. A practice of inflating, actually devaluing the currency. That way a government had more physical money to exchange for good and services it wanted to buy. The vendors, for a while were fooled into thinking they had actually been adequately paid. They in turn paid there labor cost with devalued money etc. The market eventually figures this out and inflates the cost of it good and services. The laborer strikes and gets more money. The government gets more taxes. The legislators want to buy more goodwill so the Federal Reserve Bank is encouraged to print more money. Eventually the funny money exceeds the gross domestic product and the system collapses.