Dialect

Words have consequences. Words can be used to confuse people. Money is a simple concept but has been made complicated by phrases such as “elastic money” and “quantitative easing” and even “central bank.”

Issuing more dollars vs. Quantitative Easing

The phrase “quantitative easing” rests on the myth that a slow economy needs more dollars in circulation.  Issuing more dollars only takes value from existing dollars. The larger quantity of dollars still buys the same amount of goods in the general marketplace, but each dollar is a smaller share of the goods.

Think of the value of all dollars as a pie, and each individual dollar as a piece of the pie. Ten dollars would be ten pieces of pie. 100 dollars would mean 100 smaller pieces. If you had five pieces of pie, then at one point you had half of the pie. After a round of “baking easing” done by the central baker, you would have only  five percent of the pie, but you’d still have 10 pieces.

What happened to your part of the pie? It was taken from you and given to military contractors and government employees and rich corporations.

Federal Reserve vs. The Federal Reserve

The institution called Federal Reserve is a private bank heavily influenced by the government. We don’t call it “The Federal Reserve” for the same reason we don”t say “The Federal Express.”

Monopoly Bank vs. Central Bank

Federal Reserve Bank  is only “central” because it has a monopoly on the issuing of currency. If you walk into any bank, you can only get “Federal Reserve” notes. Imagine if every car dealership sold the same cars. Banks used to issue their own notes.

Money Stock vs. Money Supply

The word “supply” implies that a greater supply will be good. For an item used as money, the opposite is true. The more dollars in existence, the less your dollars are worth (assuming demand doesn’t change).

When you use a product or anything else as money, you want the item to have just enough quantity (and just enough value) to make it a popular medium of exchange. Once you own it, you don’t want more to be made, because an increase in the quantity will decrease the value of the product and your holdings, assuming demand for the item does not change. Therefore, we refer to the amount of a product in existence as the money stock. The value of the dollar and yen and euro is based on the quantity (and demand). Do you track the quantify of dollars created every year?

An even better label would be Federal Reserve Dollar Stock since there are many types of money.

Tokens vs. Dollars

Whenever possible, we refer to Federal Reserve dollars as Federal Reserve tokens because dollars are silver coins. Federal Reserve used to issue bank notes redeemable in silver coins. When FDR outlawed the ownership of gold and when Nixon reneged on redeeming notes, the notes became tokens.

Monetary Confiscation vs. Inflation

The word inflation implies a natural, unavoidable event, whereas with fiat currency the event is planned. Prices based on fiat tokens rise when the value of fiat tokens fall, and the fiat token value usually falls because banks created more tokens. The value could also fall if demand falls.

It is the banks—not an unavoidable, natural force—that devalues the tokens. For this reason, we refer to inflation as monetary confiscation.

The word inflation still applies when the supply of a product used as money becomes more plentiful. If people used emerald stones as money and someone discovered a huge emerald stone mine, the supply of emerald stones would rise or “inflate,” and the value of all stones in circulation would fall (and prices based on those stones would rise).

There is no mine or quarry for fiat currency tokens. Banks create them with a keystroke or via the printing press. And like stock shares diluted when a company issues more shares, the new fiat currency tokens steal value from holders of existing tokens and lend that value to people seeking loans, while the banks charge some interest, of course.

“Stole the gold” vs. “Go off the gold standard.”

When Richard Nixon announced the U.S. Treasury would no longer redeem Federal Reserve notes for gold, the U.S. government officially stole the gold owned by everyone holding Federal Reserve bank notes. To call this act “going off the gold standard” is a deceiving euphemism. If a coat check at a restaurant announced it would no longer redeem coat check tickets for the coats, would you call that a crime or just “going off the coat standard”?

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