Tuesday, September 25, 2012

The Spanish Financial Catastrofe'

This story gives us a glimpse into what happens when a government spends a lot of money that it doesn't have. Note that much of the spending was on "infrastructure", such as the unused Valencia airport. Keynesians and their weird MMT cousins are constantly touting infrastructure projects financed with fiat money as the answer to a moribund economy and high unemployment.

 The Spanish, members of the EU and restricted to the use of the Euro, at least officially, don't have the ability to print their own money, a luxury in which the US indulges enthusiastically. The current thinking isn't all that much different than it was during the "progressive era" in the last decades of the 19th century. Go to bimetallism because there isn't enough money in the system. Now the idea is to print more money, buy more dubious assets, and get the snowball rolling down hill once again.

 Curiously, the battle against counterfeiting seems to be more intense than ever. The Treasury has redesigned currency to make production of bogus bills more difficult. Retail clerks routinely examine even $20 bills with special pens to determine their authenticity. However, all but a tiny percentage of exchanges in the US are done electronically or by check. Cash has become a relic of a bygone barbaric era. Accounts are now kept on an electronic scoreboard somewhere in Oz.

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