Printing Money To Save The Currency

[Some thoughts on what passes for conventional wisdom these days  amongst the world's economists and policymakers, namely, that more money printing is the cure to the world's financial problems.] 

Earlier today, ECB (European Central Bank) Chief Mario Draghi announced that new coordinated action will be taken to create more money “out of thin air” in order to buy more sovereign debt from profligate eurozone countries such as Spain and Italy, part of the central bank’s latest effort to save the euro currency.

If ever there were an effort by a group of policymakers that is counter-intuitive it is this - printing money to save the currency.

Now, some would say that extreme times call for extreme measures and, to be sure, not much is new about the ECB buying sovereign debt that few others want as the bank has already purchased more than 200 billion euros of the stuff, however, today’s announcement appears to be much more of an open-ended commitment to print new money in order to ensure that the old money survives, lest it end up on the trash heap of other pure fiat currencies throughout history.

Now, granted, the situation in Europe is different than if this were a single, autonomous nation with its own central bank, in which case, printing massive amounts of money for whatever purpose would more likely harm the currency than save it, but the situation in Europe provides a good example of how dramatically the world has changed in recent years after the 2008 financial crisis and global recession morphed into a European sovereign debt crisis that, in the years ahead, is sure to be followed by a U.S. sovereign debt crisis.

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