Perpetual Wealth

Wealth Program Reviews | Wealthy Affiliate, Profit Lance & Rich Jerk  I am beside myself with admiration for my recent idea–a way to create perpetual wealth without effort. Normally, one must be humble when involved with markets. However, who will have the fatal conceit to deny my brilliance?

Perpetual Wealth

The Federal Reserve can finance the consumption of all Americans’ wants through bond purchases with money created from a computer keystroke.  The Fed, in turn, could sell those bonds to banks. Since the U.S. Dollar is the  world’s reserve currency, Americans can buy from foreign suppliers who then can invest in our government debt. As Americans buy ever more goods, since everything would be free, our trading partners would take the Fed’s money and buy more U.S. government debt.  More bond buying lowers interest rates–creating more profits from buying bonds–a perpetual benign circle of growth and wealth.

Say Americans want free gasoline. Let’s create a paradise. A government agency can buy gasoline from foreign suppliers at market prices and then sell to the consumer at $0.00 per gallon.  This “gift” or subsidy–rather than tax the populace–the government issues gasoline bonds which the Fed purchases. In turn, the Fed just creates the money through a computer key stroke saving precious paper and cloth.  The Fed can choose to hold these bonds or sell them to others. I estimate that the Fed could easily buy two trillion dollars of bonds PER MONTH to finance a doubling of America’s economy. Let’s go from a $11 trillion economy to $22 trillion.

Demand would explode causing foreign economies to boom. With the world economy growing wars would become obsolete. Foreign aid redundant. Americans could just consume.

Why hasn’t another thought of this? Do you think because of ignorance, sloth or stupidity? Do you think my Nobel Peace Prize is assured?

For anyone rash enough to criticize, can you compare and contrast my plan with the Fed’s current operations?

Your thoughts welcome!

9 responses to “Perpetual Wealth

  1. Haha, brilliant. Buffett quipped something similar around the debt ceiling debacle last year. He said something like why are we debating taxes. We don’t need them! The fed is already covering the deficit, why not cover the tax base too.

    The above and your excellent “idea” above perfectly illustrate just how absurd this whole central bank printing regime is.

  2. What are you trying to get to? What you’re implying “should” happen (inflation, gold, loss of confidence in usd etc) hasn’t happened yet. In fact quite the opposite. Shouldn’t one start questioning one’s beliefs at some point? Or is it that no emperical evidence is good enough?

      • How many books does it take to make the point that govt is evil and fiat currency is equal to nuclear holocaust?

        Clearly the standard of living in america has gone down to he gutter since bretton woods. So much hunger. So much poverty. Only if we could all just go back to he barter system.

    • Kabir: I can count on your vote for the Nobel Prize?

      • I still don’t know what you’re trying to ge to. But i’m sue you’re right since mises and rothbrand agree with you. Clearly they haveall the answers. Having said that i would nominate you for running a super hugh quality blog before it became the longest running advertisement for kitco.

  3. I like your idea. Why stop at consumption though? As long as America’s currency remains strong, why not use the printed money to acquire every foreign corporation we can get our hands on? America could take over the world.

    Here’s another thought experiment. Say you have a company with extremely overvalued stock ABC. ABC continually issues new shares and uses them to acquire undervalued companies. Is ABC a short or a buy? I think it depends on how long it can issue overvalued shares. You might want to short it since by definition the shares are extremely overvalued. But it could create a lot of value acquiring undervalued companies and shareholders will get rich. Taken to the logical extreme, it could buy up every company in existence. Having overvalued shares confers this potentially huge advantage to the company.

    America has this kind of advantage right now. Markets believe in the currency and the financial strength of the government. Even though it may be undeserved, this misplaced faith is valuable and changes the equation. This is an example of Soros’ theory of reflexivity, where the output of the equation is itself an input. What looks obvious may turn out to be wrong when reflexivity is involved. Reflexivity says a “fair value” or equilibrium is more elusive than you’d think. The more faith and perception play into the value of something, the more reflexivity is involved, and I’d say those are definitely big factors for the US dollar and US govt debt.

  4. Dear Walter:

    A brilliant supplement to my awesome/stupendous/brilliant idea. The other idea to add is the perfection of the Ph.D. standard. 9 central planners and bankers will lead us to perpetual glory–assuming they use my idea.

    Central planning always and everywhere works. Look at the cornucopia of North Korea, Cuba, Stalinist Russia, Mao’s China, Hitler’s Germany. Study history to know what works.

    Central planning is by far the ONLY way to create permanent prosperity because we need the brain trust to run our lives. Thank God for that.

  5. Finally, just to clarify, I do not think HYPERINFLATION is probable in the US. Why? Because it would destroy the dollar and cause the FED to lose its power. What I do think will happen is what has happened for the past 100 years–the Fed inflates, then raises rates a little to stabilize the dollar, a recession/crisis hits, then it reflates. The Fed currencly has stepped lightly on the brakes as money supply growth has “tapered” off to 3.5% growth down from 10% so expect weakness then a reflation. Hyperinflation won’t solve America’s major problem–unfunded liabilities–since they are indexed to inflation.

    Booms and busts will continue to become greater and greater due to the build up of debt in the monetary system. Therefore I own some gold/silver as an insurance policy and miners are very cheap in my opinion so I own RGLD, FNV, SLW, AEM, GG, AUY, NGD, AG, EO, GORO, etc. –I avoid over-indebted gold miners like ABX.

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