| Ma'ake |
12-21-2008 06:06 PM |
I would argue that when the *Fed* is doing this, it's not our money, in the same sense that the actual budget deficit and national debt involves our tax money, directly. What Treasury does involves real money, definitely.
The fed "prints money" to manage the money supply. If the money supply stays stagnant as growth occurs, dollars become scarce, deflation occurs, hence the Fed increases the money supply over time. (This is the same reason the gold standard was abandoned - there is a finite amount of gold.)
What the Fed is doing now is taking toxicity out of the economy by printing money (electronically) & putting that money into the economy. What the fed is doing doesn't involve our money directly. immediately, but pumping this kind of money into the economy will provoke inflation, which *does* affect us directly.
Bernanke's analysis of the Great Depression indicates he will do whatever it takes to keep the economy flowing, stem serious decline in economic output, and then deal with inflation later. At this point, the estimates I've seen put inflation in the future in the 8-10% range.
The question becomes is this a reasonable price to pay - if the choice is unemployment in the 15-20% range vs dealing with deferred inflation, which poison does one choose? I don't think there is much of a choice, personally. I have to trust Bernanke... and soon, Geitner.
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