Money printing operations begin

August 11th, 2007

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Back in Inflation or deflation first?, we said

Now, faced with the threat of a deflationary recession, what can the Fed do? Politically, it is impossible for them to allow a recession run its full course in order to clean up the prior excesses of the bubble. They will do anything and everything to ?prevent? another recession. The only way for them to do that is to do what they always did?pump even more liquidity into the economy (a.k.a ?print? money).

In A painful cleansing or pain avoidance at all cost?, we said,

Even if Ben Bernanke is an Austrian economist, political pressure alone will do the job of forcing him to act otherwise. This is the Achilles? heel of democracy. The mob will scream at the Fed to bail them out by ?printing? money (i.e. pump liquidity into the economy in the form of cutting interest rates). Should the Fed refuse to comply, we can imagine the mob storming the Federal Reserve to demand the head of Ben Bernanke. Therefore, the Fed will have no choice but to acquiesce to the desire of the mob, whose aim is to avoid immediate pain as much as possible.

In this news article, Stocks open sharply lower on global credit woes, it reported that,

The Fed early Friday said it injected $19 billion into the banking system. The European Central Bank added another $83.6 billion, after Thursday’s $130 billion injection, and the Bank of Japan on Friday added $8.5 billion.

The U.S. Federal Reserve on Thursday added $24 billion in temporary reserves, and Canada’s central bank put $1.55 billion into the markets.

In future, when we look at today through the lens of history, will we see this as the beginning of the end of fiat currencies?