This week's economics lesson

If you have 100 lbs of gold, and you use 100 pieces of paper to represent that gold, each piece of paper is worth 1 lb. of gold.

If you then print 1 trillion more pieces of paper but still have the same amount of gold, the value of each piece of paper effectively moves to zero.

So when Ben Bernanke says "I'm going to print a TON of money and use it to buy government bonds," not only does that weaken the dollar, but it weakens the government. Their bonds are now owned by an organization whose monetary strategies are similar to the little kid who thinks four pennies is worth more than one nickel.


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