Is “easy money” bad and why? Politicians and Wall Street traders often advocate for easy money policies because in the short term these policies can give a temporary boost to stock prices.
By the time the consequences kick in, politicians have already won their re-election campaigns and Wall Street traders have already offloaded their stocks, earning a profit for themselves. However, eventually it’s the rest of us who are left with the bill.
The debate is one of degree because anyone who is honest should be able to agree that if enough money is added to the economy, inflation and hyperinflation will result.
Put simply, inflation is when the price of everything “inflates” or gets more expensive. People who are retired and living on fixed incomes are impacted especially hard. Many people have noticed how expensive food is at the grocery store lately. New cars are another example where prices have soared. In fact, a new car now averages about $50,000. “Hyperinflation” is inflation to an extreme degree.
Both history and current events today give us a plethora of examples of the devastation caused by easy money policies, where inflation gets out of control and devastates a nation’s economy.
Venezuela is one current example of a country where a once prosperous economy has found itself beset by hyperinflation. Its currency, called bolivar notes, have become so worthless that mounds of them can be seen in street gutters. A cottage industry has even developed where people sew this nearly worthless money together to make bags.
Zimbabwe and pre World War II Germany are other notable examples. In fact, in pre World War II Germany, people used currency for wallpaper. Other examples of countries where hyperinflation was once the order of the day are Israel and Argentina in the 1980’s.
Eric Eisenhammer
Eric is an Asset Protection Specialist. He is co-founder of Legacy Defender Insurance Solutions and holds licenses in Life and Property & Casualty insurance. Eric earned a bachelor's in Finance from California State University, Northridge and a Master's in Public Policy and Administration from Sacramento State.
