My Letter to the NY Times re: Central Bankers' Plan to Destroy Capital

Dear Sirs:
On Thursday, February 16, 2012 Binyamin Appelbaum reports that...

"The Fed has held rates near zero since late 2008, seeking to spur economic activity by punishing savers and rewarding borrowers."

No doubt Mr. Appelbaum is correct, but here is the great error: there can be no borrowing without a prior act of saving. Yet the Fed wants to punish savers. One can borrow only what someone else previous saved. Capital accumulation can occur only from prior savings, not from consumption. Yet central bankers everywhere pretend as if the fiat money that they produce out of thin air IS capital.

In a related article on the same day Julia Werdigier reports that...

"The Bank of England said Wednesday that it was prepared to inject even more capital into the economy through its asset purchasing program, if needed."

Again, fiat money production is NOT capital.

The European Central Bank is not to be left out of this madness either. On the same page as the Bank of England report Jack Ewing and David Jolly report that...

"A European fiscal compact agreed to in December and a move by the European Central Bank to allow banks to borrow almost unlimited sums at 1 percent for three years have helped to ease the sense of crisis in the bloc."

There will be no recovery without capital accumulation, yet central bankers everywhere are determined to consume capital out of the fallacious assumption that it is consumption that produces prosperity.

Patrick Barron