It is often said that the FED is printing money from thin air. While this is true to some degree and I clearly have stated this. I think it is more accurate to state that these new dollars are created by shaving off value from each dollar in existence. |  |
 | Let us look at an imaginary amount of capital, let us call it's value $100x. Let us say that there are 100 Billion dollar bills out in circulation. If the FED prints up 1 billion new dollars, the imaginary amount of capital stays at $100x, however now spread over 101 billion bills. Every existing bill is taxed roughly 1% and the value going into the new dollars. |
A gallon of orange juice has 1,792 calories in it, thus 128, one-ounce cups, of 14 calories per ounce. If you added one gallon of pure water to the one gallon of orange juice, you would now have 256 ounces of orange juice; however, each ounce of this diluted orange juice would now have only 7 calories per one ounce cup. |  |
 | QE is like adding water to orange juice, the calorie count does not change, the number of calories per ounce changes. To consume 14 calories, one used to have to drink one ounce, after the QE on OJ, inflation occurs, and now we need to drink two ounces of OJ. Each existing cup, like the dollar, must give up calories or worth when extra water or dollars are added to the whole. |
| The solution is simple, add more orange juice if you need more juice and the calories per one ounce will stay the same. Likewise, when extra currency is needed, add dollars backed by things of worth. If we need $100 billion of new currency, we should add $100 billion of precious metals, stocks, commodities among other things of real value. Monetary Policy Quantitative Easing (QE) = Devalued Money |  |
