People who are heavily addicted to drugs are always thinking of ways and excuses to get high. Modern governments, who are heavily addicted to debt and spending act in the same exact fashion. They relentlessly seek to conjure up excuses to expand the debt and money supply even more.
In both cases, consequences are shoved aside. Feed the addiction now….worry about consequences later, if ever.
The Keynesians, who are the idea junkies for the government, are constantly trying to craft the excuses to print…print…print! No logic is necessary. The excuse merely has to sound good to the government-educated public.
The latest curveball that the Keynesians are throwing goes something like this:
Governments need to listen to the market. And the market is saying that interest rates on government debt is very low. This is proof that governments aren’t borrowing enough. Governments should listen to the market and borrow more!
Sounds pretty straight forward. What problem can the average Joe have with that? He can go look at bond yields and say “Hey, that’s right!…the market is saying that the government should be borrowing more”.
Fortunately, Peter Schiff has eloquently squashed this Keynesian illusion.
Here’s Peter’s response:
It overlooks the most important aspect of this whole deal, and that is the quantitative easing, the money printing, the debt monetization. The reason that interest rates are so low is because central banks are buying up all these bonds – they’re printing all this money.
Now, if central banks weren’t doing that, if the Fed didn’t have the quantitative easing, would interest rates still be so low?
In fact, I would argue that the mere fact that all this quantitative easing is going on, is proof that governments are borrowing too much money right now. Because they can’t find enough private sector demand at these low interest rates, the only reason they can get away with borrowing so much money is because the central banks are monetizing it.
The fact of the matter is…the markets are being distorted by the central banks. They don’t care how much they lose buying these low yielding government bonds. They just create the money out of thin air. They’re doing it for a political agenda.
So things are not as obvious as the Keynesians make it seem.
Again, the truth doesn’t matter to them as long as they get their way right now. They need another hit of money, and if the above excuse doesn’t work, they surely have some more in the pipeline to unleash on the trusting masses.
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