They say central banks are supporting failing government policy by printing more money and devaluing currencies.
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On March 19th, the Bank at last promised to loosen policy by printing more money.
Its continuing worry about deflation can be better addressed by printing more money.
Already there is talk of the Bank of England offsetting the pain by printing more money to buy more government bonds (a policy known as quantitative easing).
The government can react to this threat by either printing more money or rolling over the deficit to domestic banks.
Indeed, one can always pay the troops by printing more almost worthless money, as the U.S. did in the American Revolution and Robert Mugabe did in Zimbabwe.
Many market watchers perceive the EU bailout package and further measures to shore up the U.S. economy will amount to more quantitative easing by central banks (read that printing more money).
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In fact, its even more true for Japan because a weaker currency caused by printing money has major economic benefits for Japanese companies whom will now be able export more.
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Instead of paying back the excesses of the credit boom in terms of magnitude (a more severe economic contraction that clears the system), we have opted to repay debt in the duration of our economic malaise, thereby opting to stunt the natural course of deleveraging by borrowing more at the sovereign level and printing money.
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The market's confidence in the U.S. to service its debt (without recourse to inflationary money printing) is much more affected by expectations of long-term growth than by dog-and-pony exercises on spending that future Congresses will revisit umpteen times in the future.
The ECB could try to engineer this by aiming for a, say 5% eurozone inflation rate for a few years or more and do that through either simple money printing or by monetising some of the periphery debt.
Remember, five years ago the premise behind all the money printing was that it would be a temporary bridge to get over the difficulties created by banks owning more bad paper then their total capital worth.
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