One might say the Fed is “printing reserves” that lodge on the banks’ balance sheets, but is not “printing money” beyond what is needed. Yes, it can, but, so far, quantitative easing has not resulting in money creation in “voluminous quantities.” QE1 and QE2 added to Federal Reserve assets and bank reserves, but not substantially to the money supply because of the banks’ appetite for holding excess reserves. However, “quantitative easing,” that modern euphemism for surreptitious deficit financing in an electronic era, can no less become an assault on monetary discipline.” “Money may no longer be physically printed and distributed in the voluminous quantities of 1923. This passage is from the current back cover: One can’t blame the author and publisher, however, for tying the two together in a subsequent printing to generate new interest. “When Money Dies,” it turns out, was originally printed in 1975 so, it was not originally intended as a warning about the dangers of QE1, QE2, or Operation Twist, even though monetary policy was not stellar in the 1970s. The warning is a useful reminder, however.
We are not the Weimar Republic and the Federal Reserve (or the ECB for that matter) is not the German Reichsbank of the early 1920s. I have no quarrel with the book, but I don’t think it describes the path we are on. That, I assume, is the reason my neighbor was so anxious for me to read the book. My problem was that readers would assume that we are on the same road to hyperinflation and dollar collapse. Hyperinflation is hell in almost every respect, and it was caused by the substitution of the printing presses for appropriate monetary and fiscal policies. On the other hand, I got it long before the author was through feeding it to me. Original sources, especially personal diaries, enable us to feel the pain of the times like no textbook could do. The strength of the book was to personalize all these travesties. (Keynes tried, first at the British Treasury and later in his book, The Economic Consequences of the Peace.)
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