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Downsize DC Predicts Massive Price Inflation



Perry Willis
Downsize DC
February 18, 2009

The nation's money supply is soaring. Here are the numbers for the past year, as measured by M2...

  • In January of last year the money supply stood at $7.3 trillion
  • As of this January the money supply now stands at $8.2 trillion
  • This means the Federal Reserve has created nearly $1 trillion new dollars out of thin air, in the space of just one year

The Fed claims they're doing this to save the economy. They also claim they'll be able to withdraw this new money as soon as the economic recovers. They'll do this buy selling various financial instruments they've purchased with their funny money. They'll then retire the dollars they receive in return for these assets, thereby shrinking the money supply before it causes price inflation.

This sounds feasible, but can they really do it? Will the market want to buy what the Fed has to sell? The Fed has purchased huge amounts of distressed assets from the private economy, as well as vast quantities of Treasury notes from the government. Will the market want to buy these "assets?"

The Federal government has sold trillions of dollars of Treasury notes to fund their many bailouts and interventions, and they aren't done yet. The market is already flooded with government debt instruments, but Congress wants to sell more and more of them to fund additional vast new bailouts. Will investors want to buy more of these government debt instruments when the Federal Reserve decides they need to sell the ones they own?

And what about the distressed assets the Federal Reserve holds? The Fed bought them because supposedly no one else wanted them. Will that suddenly change once the economy recovers? Doesn't the very idea of an economic recovery imply that people will have better ways to invest their money?

And doesn't an economy that seems to be recovering because of an influx of counterfeit dollars risk collapsing again if those dollars are withdrawn, or suffering through both inflation and stagnation if the dollars can't be withdrawn?

We believe the federal government has created another bubble, this time in their own debt instruments. We believe this bubble will burst, just like the previous bubbles. People will not want to buy the Fed's Treasury notes, just as people currently do not want to buy houses.

The Fed will not be able to sell enough of its assets at a high enough price to withdraw their funny money from the economy. The money supply will remain inflated and prices will rise. Your cost of living will increase and the value of your savings will decline.

You must decide how you're going to respond to this. You can either curl up in a ball and take your beating, or you can fight back. We must look to the future, to an economy free from the booms and busts caused by the Federal Reserve's legalized counterfeiting.

It's time to abolish the Federal Reserve.

As the problems we anticipate manifest themselves the public will become increasingly receptive to this idea. We must be the advance guard, educating our friends and pressuring Congress.

Please use our quick and easy Educate the Powerful System to ask your elected representatives to co-sponsor Ron Paul's "End the Fed" bill.

Use your personal comments to tell Congress you're aware of how much the Fed has inflated the money supply, and the difficulty they'll have in withdrawing this money before it causes massive price inflation.

Then, please check out our partner on this issue, End the FED.

Also use this Dispatch to educate and recruit people to help you. Forward this message to others and Digg it on our blog.

Thank you for being a part of the growing Downsize DC Army.

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Why Did This Happen?
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Stimulus: The Power of Names
David Friedman, Ideas, 01.31.2009

Stimulus Defined
S.M. Oliva, Ludwig von Mises Institute, 02.04.2009

Government is not the panacea for an ailing economy
Libertarian Party, 03.20.2008

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Cato Institute

Campaign for Liberty


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