As a retired economics professor, I try to keep up with what is happening in the world of finance. One item that especially interests me is the monetary base. The MB consists of some coins and bills, but most of it is bank money on deposit in the Federal Reserve.
The MB is the “raw material” from which dollars are created in the banking system. The more units of anything that exist the less each individual unit is worth. So increasing the MB reduces the purchasing power of individual dollars. It causes price inflation.
From 1913, when the Fed was established, until about 1965, the MB hardly grew at all. At that time it began a slow upward climb in total amount. The climb gradually increased in steepness. In 2009 the climb became very steep and has continued so until today.
So far, much of the MB has been sitting idle in banks. Banks have been afraid to lend and many potential borrowers are afraid to borrow. All that’s necessary for the trillions of dollars backed up in the banking system to come flooding out is a change of mood. This can happen in an eye blink. More than one thing could cause that change in mood.
If there is even a slight change in mood, trillions of newly printed dollars will pour forth. The value of each individual dollar will crash and we’ll be in a runaway inflation.
I owe much of this analysis to my friend, economic and political analyst Richard Maybury, publisher of the Early Warning Report. I have followed the EWR for more than 15 years and have yet to observe a significant error in Rick’s analyses.
Rick advises, and I agree, one should get out of dollar denominated assets now — immediately.
ROGER M. CLITES