Monetizing the Debt: Explanation For Non-Economists, Bankers and Other Laymen

This is MUST READING for those who want to know what the government is doing to our money and economy.

Via Seeking Alpha:

As I see uncountable search engine inquiries with the phrase "monetizing the debt" landing at my blog (The Prudent Investor) I begin to realize there is a huge void of knowledge not only amongst interested economic laymen but also among employees from what were highly prestigious financial institutions only 2 years ago. Let me fill you in with the executive briefing version. In order to monetize the debt you need the following:

1. An economy in shatters that cannot produce enough taxes for the state
2. A parliament/congress/senate full of incompetent politicians eager to continue showering their constituencies with pork regardless of a nation's declining tax income
3. A people that has never received any macroeconomic education in their schools (otherwise they'd be shouldering the pitchforks by now)
4. A central bank with a transaction computer running under Unix (Windows would probably crash before any real economic damage could be done)
5. Commercial banks with executives searching the web for an easily understood explanation of the said term and no idea about monetary inflation either, but a perfect understanding of their contracts sweetened with lavish bonuses, no matter whether they remain prudent or crash the cart against the wall.

Now that we got our most important players together (starving retirees, widows and kids will only appear on the scene after the monetizing-the-debt-party has sunk the world into a depression), we take a punch bowl (literal), fill it with cheap credit and pass it around to everybody except the central bank computer (it will have to work hard very soon).

In contrast to all commodities, unbacked fiat money is created at virtually no cost. This is most comfortable as it means the central bank computer can keep the party going.

All that needs to be done are a few keystrokes (maybe they already have macros for the task) and a screen wide enough to accommodate the ever growing number of zeroes after the $/€ sign.

Read the entire article here.

But don't worry folks. Remember they are the government. They know what they are doing and they are on our side.