Tuesday, November 24, 2015

Why Do They Arrest Counterfeiters?

Patrick Barron, an associated scholar with the Mises Institute, sent along to the Institute  a letter he wrote to the Philadelphia Inquirer in response to their article, "Fed to help teachers learn finance". 
Dear Sirs:
Here is what the Fed will teach about money and finance:
Lesson #1: Print money
Lesson #2: Print more money
Lesson #3: Print even more money
Here is a quote from Mr. Bill Martin, a high school teacher who has taken many Fed classes:
"We hook the students with questions about the $100,000 bill," he said: "Where does money come from? It's created by lending. You take some of that $100,000 bill, lend it at an interest rate, say, to 100 people, and they grow a business and it becomes $200,000. That's how wealth is created. Growth doesn't happen unless lenders lend. You borrow to grow, and then pay it back with interest."
It's magic! (Or is it?) If banks can create $100,000 of wealth at the stroke a pen (by lending), why can't you or I do the same thing? We print $100,000 on our personal copiers and lend it at interest. Voila! Instant wealth!
Pardon me if I do not believe this nonsense. Wealth is created by hard, smart work, plus saving to build capital. It is not created at the stroke of a pen or from the rollers of a printing press.


1 comment:

  1. The government arrests counterfeiters for the same reason that drug dealers whack someone who tries to move in on their territory.