A guest post by Benjamin Cole
Suppose you had a nation in which the amount of cash in circulation—fiat money backed by nothing—tripled in a 15-year period. Suppose that nation had $3,400 in U.S. greenbacks floating around for every resident.
As in, the typical family of four had $13k in Benjamin Franklins in the cupboards, to tidy them through the weekend.
On average, I just described the United States.
Ask any typical modern economist what would happen in said nation, and the answer would be “rampant inflation.” Now, of course, that is the monomaniacal answer that modern economists give to nearly any question, but in this case, it warrants consideration.
After all, every U.S. resident has an extra $2,100 in cash on hand compared to just 1996? And they had $1,300 laying around then?
“Ah,” say our “experts.”
Much of this growing Niagara of paper cash has leaked overseas, and no one knows how much. Some say half. Well, as a guess, it means they cannot be wrong by more than half, so it is good guess.
It is often darkly hinted that drug lords and other never-do-wells are lugging around suitcases of cash, a fact backed up by innumerable melodramatic stereotypes.
There are $600 billion worth of cash in briefcases out there?
Word on the street is that large briefcase can hold about $1 million, American c-notes. I asked a really mean-looking “courier” at the Mexican border once, and that was the answer. He also placed his hand on a bulge in his jacket. That terminated any follow-up questions, but I Googled around, and his answer actually checks out.
So, there are 60,000 briefcases of U.S. cash in circulation in the global underworld.
No wonder I can’t find my bags at the airport. The carousel is clogged with all those briefcases.
But then, academic economists are not known to be experts on the underworld, as it really is. The Fed, for its part, gets very tetchy about the subject of U.S. cash in circulation, and claims the drug lords are not hoarding all that cash as much as other academics say.
But then how much do the wing-tipped Fedsters know about submachine guns and El Chapo?
Be that as it may, prices since 1996 are up about 40 percent in the United States, not 200 percent.
There is a huge disconnect between literal money-printing, even runaway fiat money printing, and inflation. We get very little bang for our buck.
I blame El Chapo.