Money For Nothing and Your Checks Fact Free

Fairy Godmothers, Leprechauns and the Federal Reserve.

What do they have in common? Obviously, the magical ability to create something out of nothing. In the Fed's case, it's cold hard cash. Don't believe me? Just ask PolitiFact:

Image from PolitiFact.com (Arrow added)

In this case, for once, PolitiFact deals relatively fairly with Kucinich's statement, and provides a decent analysis of what transpired regarding how the Fed created the money and how and to whom it was passed out to. For that reason there's no need to get into the details of their fact check.

The problem with this rating is their acceptance of the liberal dogma that the money is just simply created out of nothing without any tangible cost. PolitiFact even gives a "Hells Yeah!" to the success of the operation-

Eventually, all the money was repaid, with interest. But according to [Walker] Todd, rather than wipe the money off its books, the Federal Reserve chose to use much of it to further stimulate the economy by purchasing Fannie Mae and Freddie Mac mortgage-backed securities on the open market. So that money remained in circulation.

Hooray! It worked so well the magic money created even more money, and then went to support housing programs for the poor! Heck, it makes you wonder why the Fed doesn't just print a gajillion quadzillion dollars every day. Goodbye debt and deficit, helloooo Easy Street.

The reality that PolitiFact is evading is this money actually does come at a cost. It's not created out of nothing, but rather at the expense of the money that's already in circulation. This my friends, is the evil known as inflation.

To individuals, inflation is a lot like getting mugged, but not at the point of a gun in the streets. Inflation is the slow theft of your property by the very people charged with protecting it. Jonathan Hoenig has a simple explanation:

One need not be an economist to understand inflation. If you started writing checks with no money in your account, they'd throw you in jail. Yet when the government does it, at least for the time being, it's called "stimulus" and rewarded with high approval ratings, that is, until the bills come due. And they always do.

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The law of supply and demand cannot be conned. And as the supply of money increases, prices rise, and the dollars you and other productive members of society have worked so hard to save decrease in value.

PolitiFact doesn't tell its readers that inflation, created by government tomfoolery, hurts those who save and the poor the most. And if there's any doubt about the destructive nature of inflation, Hoenig wrote another article about the chilling yet very real case of Zimbabwe:

In 2008, the Los Angeles Times reported how a beer in the Zimbabwe capital that cost 100 billion Zimbabwe dollars on July 4 had already risen to 150 billion an hour later. A few months after that, Zimbabwe issued the 100 trillion-dollar banknote, then worth about $30 (U.S.).

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In 1980, the Zimbabwe dollar was actually worth more than the U.S. dollar. What deteriorated over those 29 years wasn't the weather or the water, but the political philosophy. Once known as Africa's breadbasket, government destroyed the currency to the point where even "billionaires" were starving in the street.

Frankly, I haven't spent $150,000,000,000 on beer since I hung out with these guys one morning in Green Bay. I can't imagine paying that for a single can of sudsy goodness.

The bottom line is PolitiFact did a serious disservice to their readers by ignoring the real cost of the Fed's magic money. It's not created out of thin air. It's a tax on income you've already earned and a tax you had no chance to vote on. Inflation devalues the wealth you have labored so hard to produce, its worth destroyed by the whim of political expediency.

History is littered with examples of the evils of inflation. Unlike magic money, inflation is real. Kucinich should be allowed a license for hyperbole. He's a politician and was speaking in a condensed television format. But PolitiFact promotes themselves as the arbiters of truth and likes to squawk about giving readers the whole story. The act of ignoring such a relevant component of this story proves they're inclined to pick and choose which facts they want their readers to know.


After Hours: I actually have a few Zimbabwean hundred trillion dollar bills that I purchased on Jonathan Hoenig's website, along with some other cool things. You should go there and buy stuff.