The Cons and Cons of Debt Monetisation

A critical point to understand is that monetary inflation carried out by the central bank is a problem for the same reason that private counterfeiting is a problem. It results in an exchange of nothing for something and is therefore a form of theft. Nobody would argue that a private counterfeiter was providing a valuable service to the economy if he printed-up money to buy the bonds of financially-stressed governments, so why do many people believe that the central bank can do some good when it buys bonds with money conjured out of nothing?

Adding to the supply of money cannot possibly add to the total wealth in the economy, and yet some people get richer as a result of the monetary injection. If some people get richer while the total wealth is not increased, then other people must be made poorer and what we are dealing with is a forced transfer of wealth. 

In effect, the costs of making a bad investment in bonds would be shifted from those who made the ill-conceived investment decision to those who had nothing to do with the decision. Furthermore, the shifting of costs would be done surreptitiously. If all euro savers were sent a bill for their share of the wealth transfer there would be an uprising, but when the transfer is done via monetary inflation not even one person in one hundred will be able to figure out why he/she has become poorer.

The costs to euro savers are hidden from view because rather than there being an immediate transfer of money there is a gradual transfer of purchasing power....

By Steve Saville, 321Gold