Tuesday, October 5, 2010

The US Monetary Base is Exploding Like Hell

ScreenHunter_01 Oct. 03 20.01

The US Monetary Base is Exploding like Hell – Saving Money, Get Out of Debt, Get a Job, Work Hard, Earn More Money and Invest in Pension Plans and Mutual Funds is not the Real Financial Education.

Just see the above diagram. The above diagram is of US Monetary Base. In Layman’s Language, it is the graph of the amount of money (US Dollars) printed out of thin air by the US Government over the period of time (Since 1920).

You can see that In 2006-07, The Money in the circulation (Money Supply) was only US $ 800 Billion but today in 2010, it is US $ 2.2 Trillion (US $ 2200 Billion).

It means that In past 3 years only the Federal Government has printed literally US $ 1.4 Trillion ($ 1400 Billion) out of thin air only and pushed it into the circulation.

Right now most of this newly printed money is in the Bank reserves but obviously, this money is printed to pushed into the circulation only.

For Most of the people this is a good news. After all, everybody loves to have more money in their hands. But do you now that this newly printed money will dilute the purchasing power of the existing money in the circulation by causing hyperinflation.

Not only this but when this money will enter into the circulation, it will shrink the wealth of literally millions of people in the Pension Plans and Savings Accounts.

Unfortunately, if you are doing a job than your employer won’t double your salary to cop up this hyperinflation. And yes, when this newly printed money will enter into the emerging economies like India & China, it will artificially boost the stocks, real estate, gold and other assets market like hell by creating the bubble in the various asset markets.

This newly printed money will do nothing but the shrinkage of your wealth by diluting the purchasing power of the existing money in the circulation.

Thus, your years of savings in the Savings accounts and Pension Plans will shrink. Thus, Saving money, working hard to earn more money and getting out of debt is not the real financial education.

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