The Great Monetary Mystery

How can printing pieces of paper make people better off...?

THE PUNDITS are sure the end of the gold bull market is at hand. Who knows? Maybe they're right, says Daily Reckoning founder Bill Bonner.

But it seems more likely that when the Japanese get their presses running hot the price of gold will resume its upward climb.

Or, looking at the big picture, the central banks of the world have decided that money printing is the solution to low growth and high unemployment. Unless something happens to stop them, they'll probably keep increasing the money supply. And the price of gold will probably keep going up.

But we're still laughing at the Japanese...and Ben Bernanke...and economists and central bankers everywhere.

And at ourselves! We all do the damnedest things.

Remember the dotcom bubble? People thought they could get rich by buying companies with no earnings...no assets...and no business plan that had ever been tested. They invested billions of Dollars in these companies.

And when we pointed out that the whole thing was loony...they said we 'didn't get it.'

As it turned out, we were happy not to get it.

Again, we didn't get it. How could an inanimate object...that needed constant maintenance and attention...increase your wealth? Houses were consumer items...not capital investments.

And again, it turned out that not getting it was a big advantage. So you're probably wondering...what is it that we don't get now?

We'll tell you. We don't get how printing money can make people wealthier. It never did in the past. Instead, it just led to higher inflation, bankruptcies, riots, revolutions...and disappointment.

Not that we have a closed mind about it. If someone could explain how printing up pieces of paper makes us more prosperous we'd be all for it. We'd want more of it. Heck, if one or two trillion makes you wealthier...why not print up ten quazillion?

Wait a minute. Didn't Argentina try that in the '80s? Didn't Brazil give it a whirl in the '90s... and Zimbabwe in the '00s?

We don't remember any of them getting richer. Instead, they got poorer. So, what's the magic that Ben Bernanke and the Japanese have discovered? What's the secret?

There may be one. Anything's possible. But what is it?

Until we get a good answer...we're going to keep laughing.