Why Monetary Expansion Must Stop - Patrick Barron - Mises Daily

Why Monetary Expansion Must Stop - Patrick Barron - Mises Daily: "With the creation of new fiat money, wealth has been redistributed from the current holders of money — the rightful owners — to illegitimate new allocators who steal, without getting noticed, other people's money. The first or early receivers of the new money benefit at the expense of those who receive it later, through the market process, or do not receive it at all — for example, retirees living on privately accumulated wealth. The early receivers buy at existing lower prices, while later receivers pay higher prices."

"Under sound money, GNP remains the same, because the quantity of money — and thusly, the quantity of total spending — remains unchanged.

But fiat-money inflationary spending, caused by planned inflation of the money supply, is described as economic 'growth.' The more government inflates the quantity of money, the greater economic growth appears to be as measured by GNP. But this is an illusion. It is not growth at all. It is just a consequence of measuring higher prices."

"Increasing bureaucratic oversight rests on two false ideas — that bureaucrats can discern potential problems to which bankers are blinded and that, unlike bankers, bureaucrats are not greedy by nature, so they will not take on increased risk."

"Expansion of the money supply and lowering of interest rates in order to stimulate the economy is not compatible with increased bank capital requirements and oversight boards to detect systemic risk.

The government expects that a lower rate of interest will promote more economic activity through increased lending. Yet the law of diminishing marginal utility applies also to lending . The only way to make more loans is to lend to less creditworthy customers. Yet this is the situation that more oversight attempts to prevent. Therefore, even if the government's oversight boards could detect less creditworthy borrowers, the very purpose of lower interest rates is to make loans to such people."