Newly printed money that has not been earned by the work of society is illegitimate and it is a long run destabilizing factor in the economy. The fact that much of it is being "given away" in near-zero interest in the form of endlessly renewable "loans" to favored financial institutions closely connected to the Federal Reserve and other central banks, increases resentment among the rest of the population and makes matters worse. In the case of the United States, the primary dealers have been using this funny-money to monetize deficits while preserving plausible deniability for the Federal Reserve, which has managed to avoid direct purchases from the U.S. Treasury.
The U.S. fiscal deficit, for example, will run about $1.5 trillion this year, for example. The Federal Reserve is going to print about that number of dollars in the process of buying U.S. Government bonds from its dealers, supposedly in the "open market". Short-term interest rates are being kept artificially low in order to make this trade profitable for banks during the period in which they are expected to hold onto the treasury securities.
The reason deficits have soared so high is that private demand is being temporarily replaced by government demand. The economy is being levitated by an artificial and unsustainable stimulus produced by the less than reputable practice of currency debasement. With a majority of market participants seemingly blind to this, momentum buyers, hedge funds and chart followers are buying in at stock and bond prices that are not justified by the fundamentals, and the intense probability of an eventual crash. ... [..]
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