It was then Lyndon Johnson who removed all gold backing in America, even in theory from the dollar.
So, how much money can they print? Well, this depends on how much money they can get their hands on.
So, sure, in a few years, we can all become millionaires. However, wouldn’t a burger set you back thousands of dollars? This may seem ridiculous, yet historical records show that severe cases of uncontrollably high inflation have occurred. When the Great War was over, wives in Germany would fetch bushel baskets full of their husbands’ morning salaries from the factory at midday, and they would dash to the grocery store to spend it before it went bad. Every day, more money was printed, but the situation worsened to the point where it was not worth the ink to print on both sides of the paper!
The American government, for example, produces money in two different ways. One method is by allowing banks to expand the money supply through the Federal Reserve System, and the other is by increasing the national debt. Essentially, what occurs is that you visualize being able to visit a business and purchase anything you desired or saw. Go to your basement after you get home, turn on a printing press, and shut off the funds to pay for it. You might get your wish list fulfilled, surely? The currency of the United States is this. Do you believe it is the same in Malta? Do you believe that everything is the same everywhere? Thus, the state spends money, accrues debt, and then produces money to pay off its obligation. In other words, if the Maltese government owes 10 million euros, it will borrow 10 million euros to cover the amount. This is the main purpose of this monetary system. There is a mechanism in place whereby the government has more money to spend the more it spends. Given that the more money you spend, the more money you would need to spend, one may argue that such a system is fantastic.
But remember that all of that new money, goes out and bids up the wages and prices for everybody else.
There were almost 250 billion dollars in national debt when Richard Nixon took office as president. After a few years, it had increased to 375 billion dollars. Thus, a significant amount of debt was racked up in a short period of time. A hundred and twenty-five billion dollars were owed to Richard Nixon. This implies that by the time it proceeds through this process, or the creation of new money, a total of 125 billion new dollar bills will have been entered into the “auction.”
This is why the cost of living is up.
And although Richard Nixon was one of the people who started running debts, he also used to remark, “If you run debts you cause inflation.” He threatened to implement wage and price controls, something he had previously vowed never to do, if they stopped this. He also offered a very insightful analogy: imposing wage and price limits on an economy that is expanding its money supply is like to bolting down a cauldron’s lid and then fanning the flames beneath it with more logs. Yes, that’s precisely what it is. What do you suppose would happen if you put a lid on a caldron filled with boiling water and then add more logs to the fire? It’s either the cauldron is going to blow up or you have to remove the lid and let the water boil over.
So, what did Richard Nixon do? In the first phase, he put the lid on. In the second phase, he took the lid off and it all boiled over. And then, you get higher prices.
