Printing money.....

..... or, as its euphemistically termed by those in high finance "Quantitative Easing", has been in the news a lot lately but so many people are blissfully unaware of what this is.

In essence it is stealing money from those people who have money. Because monetary control is misunderstood by 99% of the population and its effects generally go un-noticed its a theft that has been perpetrated in one form or another for centuries.

The enemy is described as inflation, or rising prices, when the real enemy is the increase in the supply of money.

Currency itself has no inherent value. It can be used as means of exchange as long as people value it as such. As the supply of money goes up, so its relative value goes down. This can be demonstrated with a simple example.

Imagine an island of 100 people where gold coins are the recognised currency; a means of exchange used in the trading of goods and services. If everyone has 1,000 coins each then those coins are farely scarce and so 10 coins could buy a significant amount of goods or services.

Next, imagine that somebody on the island finds 100,000 coins, thus doubling the supply of coins on the island. If the finder keeps this find to himself, he will now own 50% of the currency and will be substantially richer than everyone else. However, its only as this extra currency comes into circulation, by the purchase of goods or services, that it becomes apparent that the coins are worth less. Assuming the availability of goods and services remains the same, the prices should rise. At this point, the other islanders will have noticed some erosion in the purchasing power of their money.

Assuming constant supply, a rising price will result from increase in demand for an item, but if the money supply remains fixed prices of other goods should fall. Prices in general will only rise if the money supply increases.

It should be obvious that the main effect of increasing the money supply creates a shift in value from previous owners of money in favour of the owners of the new money.

The printing of money that's been going on recently has in effect been lent to various banks, so that they can make investments, be it through loans to businesses, trades on stocks and shares or any other items, presumably with a view to making more money for themselves. The hope is that most of this trickles down into the economy although its not clear whether this is happening or not. It looks like it's just pumping up prices on the stock market.

The bottom line is that the Bank Of England is taxing all owners of currency by devaluing it, but most people are too unaware to be outraged.