The future of the FED and the FIAT monetary system

Since quantitative easing in 2008 the currency supply (M1, etc) has increased about 500%, and this goes for all of the major economies of the world (Russia, China, India, Europe, etc). The currency was mostly handed to the major banks with the purpose to e.g. loan to people to buy homes, but instead the banks just accumulated assets, and the consequence is it has been an enormous transfer of wealth upwards. Historically governments often solve their problems by printing currency, leading to the fact that every single FIAT currency has gone to zero value. The FED says their plan for 2018 is to try to reduce the currency supply. I interpret all of this as a perfect example of the internal contradictions of Capitalism that Marx describes, the wealth is transferred to the top so there is no one left to buy and so markets collapse. Part of me thinks this time it will be different and I wanted to see your opinion on the topic, which I trust much more than my own speculations. Part of me thinks it will be different this time because the concentration of assets, such as housing and stock ownership has gotten to these obscene levels (the 8 richest people in the world own as much as the bottom 3.6 billion, i.e. 450 million per person, i.e. populations the sizes of continents per person), but also the currency inflation is undeniable. The massive transfer of wealth upwards means the general population can't afford anything and so profits for the billionaires will go down (interal contradiction of Capitalism), but at the same time the billionaires can't just pull their wealth out of the stock/housing market like in 2008 because currency is losing its value due to the FED printing (again currency supply is 500% higher since 2008). There seem to be 2 possibilites, a.) they continue printing and b.) they scale back printing. a.) the FED/Treasury keeps printing to infinity, continuing the transfer of wealth upwards, in which case it will lead to the collapse of the current monetary system as the FIAT currency goes to 0. b.) the FED/Treasury scales back the printing (as their stated plan for 2018). The demand side from the general population still isn't there because of the enormous concentration of wealth, but now the billionaires can pull their wealth out of the stock/housing market without worrying about inflation depcreciating their wealth, causing a market collapse as in 2008, and leading to a new round of quantitative easing as in 2008 and increasing the currency supply as in a.) and thus collapse of the current monetary system. Am I missing something? It seems either way the current FIAT monetary policy must collapse because ownership over resources is just so highly and irrepairably, at which point the only way out is to redistribute assets (people own their homes, their work etc.). This is a very long question, I just wanted to be as clear as possible, but thank you for your input, I very much appreciate it.

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  • Michael Hauser
    published this page in Ask Prof. Wolff 2018-01-21 14:14:49 -0500