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Letter to the Philadelphia Inquirer

11/24/2015

Patrick Barron, an associated scholar with the Mises Institute, passes along a letter he wrote to the Philadelphia Inquirer in response to their article, "Fed to help teachers learn finance".

 

Dear Sirs:
Here is what the Fed will teach about money and finance:
 
Lesson #1: Print money
Lesson #2: Print more money
Lesson #3: Print even more money
 
Here is a quote from Mr. Bill Martin, a high school teacher who has taken many Fed classes:
 
"We hook the students with questions about the $100,000 bill," he said: "Where does money come from? It's created by lending. You take some of that $100,000 bill, lend it at an interest rate, say, to 100 people, and they grow a business and it becomes $200,000. That's how wealth is created. Growth doesn't happen unless lenders lend. You borrow to grow, and then pay it back with interest."
 
It's magic! (Or is it?) If banks can create $100,000 of wealth at the stroke a pen (by lending), why can't you or I do the same thing? We print $100,000 on our personal copiers and lend it at interest. Voila! Instant wealth!
 
Pardon me if I do not believe this nonsense. Wealth is created by hard, smart work, plus saving to build capital. It is not created at the stroke of a pen or from the rollers of a printing press.

 

Author:

Contact Patrick Barron

Patrick Barron is a private consultant to the banking industry. He has taught an introductory course in Austrian economics for several years at the University of Iowa. He has also taught at the Graduate School of Banking at the University of Wisconsin for over twenty-five years, and has delivered many presentations at the European Parliament.

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