The View From 1776
Too Much Money, Too Little Growth
Steve Forbes provides a timely summation:
“Money measures wealth; it is not wealth itself. It is a claim on products and services that people have created. That’s why counterfeiting is illegal; it’s thievery. But when government does this, it’s called quantitative easing, or stimulus.”
- Mr. Forbes posits an interesting theory:
"Money measures wealth; it is not wealth itself. It is a claim on products and services that people have created."
Mr. Forbes is using the old fallacy called "a distinction without a difference" to attempt to reinforce his contention that quantitative is somehow "thievery."
Forbes is apparently tying to claim that until you trade the greenbacks in your bulging billfold for that snazzy new Porsche you are not actually "wealthy." That at the exact moment you hand over the wad of cash to the car dealer you have gone from pauper to rich man. Poof! Presto-Change-o!
- ...quantitative "easing" is somehow...(typo)
- Mr. Jay, I don’t think that your understanding is the same as Mr. Forbes’s.
There is clearly a significant difference between producing real things and creating fiat money.
The amount of goods and services that can be produced at any one time is limited by the extent to which people have saved in the past to fund the economy’s production capacity. There is theoretically no limit to the amount of fiat money that the Fed can produce by simply making bookkeeping entries.
Most economists would agree that having money without production of goods and services doesn’t make one, or a society, wealthy. As a reductio ad absurdum illustration, one could be stranded on an inaccessible rock in the middle of the ocean, with nothing to eat or to replenish one’s clothing or other needs. Having a $ billion of Bernancke bucks would not make the strandee wealthy.
The only real measure of wealth is the volume of goods and services produced that people will voluntarily purchase.