I believe that I will blog my way through the short book “Fiat Money Inflation in France” to demonstrate how well QE 2,3,4, won’t work. The book is a discussion of how France attempted to fix a problem which sounds all too familiar. Here is how the book starts:
EARLY in the year 1789 the French nation found itself in deep financial embarrassment: there was a heavy debt and a serious deficit.
Hmm…this should get interesting.
There were eventually cries for paper currency because many people believed that it was the lack of money that was causing financial problems. The French equivalent of the Fed chairman was dead set against this (unlike our fine Fed Chairman). He was eventually overruled by the politicians. (No need for the politicians to get involved here because Mr. Bernanke is doing all of their work for them, thus making their input unnecessary).
Someone came up with the brilliant idea of confiscating all of the Roman Catholic church’s lands and counting up the value, then issuing paper notes backed by confiscated land so that they would maintain their value. A brilliant idea, and at first it worked.
The French government issued 400 million livres in paper money, all of it backed by land, and swore that they would never issue more money against the land. (This was the equivalent of QE1).
The result? QE1 worked brilliantly! For a while.
We will pick up our next post at page 7 in the book.
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