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MONETARY POLICIES American economic history.


According to Bernard Lietaer, a former Belgian central banker who has written e x t e n s i v el y on monetary i n n o v a t i o n , the


real job of


central bankers today is to serve the banking system by keeping the debt machine


going.


He writes: "[W]e


produce can more


than enough food to feed everybody, and there is definitely enough work for everybody in the world, but there is


clearly not


enough money to pay for it all. The scarcity is in our national currencies. In fact, the job of central banks is to create and maintain that currency scarcity. Te direct consequence is that we have to fight with each other in order to survive."


The rationale for central bank


independence dates back to a bout in the 1970s of “stagf lation” – rapidly rising prices along with stagnant productivity. The inf lation surges


“By raising interest rates and stopping the growth in the money supply the Fed stands in the way of further growth in the American economy” D. Trump


link between easy-money policies and inf lation is not at all clear. The Japanese have had near-zero interest rates for two decades and cannot generate price inf lation although they are trying to. An alternative explanation for the rising prices of the 1970s is that producers’ costs had gone up, largely from increased labor costs due to the strong bargaining power of unions and the skyrocketing cost of oil from an


were blamed on political pressure put on Fed Chairman Arthur Burns by the Nixon administration to follow easy-money policies. But the


engineered 1973-74 oil crisis.


Fed policy nevertheless remains stuck on the “Quantity Theory of Money,” which says that increasing


the


money in the system will decrease the value of the currency, driving up prices. The theory omits the supply factor. As long as workers and materials are


available,


in c r e a s in g “ d e m a n d ” (money) generate


can the


supply needed to meet that demand. Supply and


increase together and


demand prices


remain stable. And while the


speculative economy may be awash in money, today the local productive economy is suffering from a lack of demand. Consumers are short of funds and heavily in debt. Moreover, plenty of workers are available to generate the supply needed to meet any new demand (injection of money). According to John Williams at ShadowStats. com, the real unemployment figure as of April 2018, including long-


FX TRADER MAGAZINE October - December 2018 47


FX


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