The head of the IMF acknowledged that too much money is circulating, hurting international and household finances.
IMF Head: We didn’t know the effects of money printing. Kristalina Georgieva, the head of the executive board of the International Monetary Fund (IMF), made a controversial comment during a live interview with CNBC. The unlimited printing of banknotes driven since 2020 by the pandemic has generated widespread inflation globally, including in first-world countries such as Europe and the United States.
Jerome Powell, head of the U.S. Federal Reserve (Fed), ratified the monetary policy and did not change its course. Powell, director of the institution that serves as the Central Bank of the United States, has been in office since 2018 after being appointed in 2017.
Money Supply
In 2022, the money supply increased by approximately 20% after adding more than $1 trillion to the FED balance between January and October 2021. According to Fed figures, there was already more than $6.3 trillion by the close of that month. The figure doubles what it was at the start of 2020, some $3.4 trillion. Things have worsened severely since then.
In 2021, with Biden as president, the problem worsened, and its course does not seem to be changing. In fact, since his arrival, there has been talking of an unprecedented public spending budget in the United States. The recently approved Infrastructure Bill outlines large expenditures for the coming years, exceeding one trillion dollars.
Meanwhile, inflation does not seem to be slowing down. According to the U.S. Bureau of Labor Statistics report, the year-on-year inflation rate reached 6.2%, the highest in 30 years. Today, inflation rounds 8.5%.
According to the U.S. government, part of the money to spend will come from tax increases to alleviate the public debt. Some Infrastructure Bill funds will come from taxes on Bitcoin and other cryptocurrencies. As Republican Senator Ted Cruz warned, this fight would affect, for example, miners. Bitcoin mining has increased its activity in U.S. territory following persecution by the Chinese government.
IMF Opinion
The IMF head stated that she believes they are not paying enough attention to the unintended consequences of their decisions. Although their actions have a goal in mind, she confessed that they then struggle to resolve the unintended impact they generate—for example, the impoverishment of the monetary system in the face of inorganic money printing.
“Faced with the massive decision to spend to support the economy, we recognized that there was too much money in circulation and too few assets,” she said. An unexpected statement from the head of the IMF makes it seem that she is sorry for the number of banknotes that countries printed because of the pandemic. The policy has generated economic problems, such as inflation and the devaluation of currencies.
Stopping money printing is something Bitcoin (BTC) enthusiasts who support the cryptocurrency monetary system want. Unlike banknotes, BTC issuance has limits, nor a central body decides about the topic.
The network allows issuing a maximum of 21 million bitcoins through mining. That is why advocates of the ecosystem believe that cryptocurrency adoption could end the increase in inflation generated by the excessive printing of banknotes and politicians’ mismanagement. It also would stop the impoverishment of citizens’ finances.
Money printing does not solve the economic crisis
The director of the IMF implied that the printing of banknotes does not solve everything. It creates new problems, which may even worsen the situation. She argued: “We didn’t think through the consequences.” She also clarified that when something new hits, they forget about other crises, which, for her, is “incredibly worrying.” It is a terrible example of how short-sighted our politicians are.
“Sometimes we act like we’re eight-year-olds playing soccer. We’re all on the ball, and we don’t cover the rest of the field.” Kristalina Georgieva
She explained that the ability to deal with more than one crisis at a time is limited, and they must focus on the essential things that determine the future.
For example, she mentioned that her daughter called asking what happened with the COVID-19 pandemic a week later when the war started. “That topic disappeared from the media, and we didn’t pay attention to it, even though it is still with us,” she declared. She summarized that there are unintended consequences of the actions taken, and they do not have enough attention to cover the whole field.
The thinking of the IMF director has arisen before the unfolding of Russia’s war against Ukraine, an unexpected event that impacts the world economy. The opinion of analysts and Georgieva herself said earlier this month: “We are facing a crisis on top of an existing crisis. In economic terms, growth is slowing down, and inflation is rising“.