money created out of thin air
Although "thin air" is an apt metaphor for creation of money without limit, it's a metaphor that misleads the naive.
For what is money in actuality if not buying power, i.e., the ability to readily interchange it with goods, services, and tax obligatins. Therefore, money should be seen, in my opinion, as created out of productivity. When viewed this way, which I believe is the correct way to view fiat money, putting more money in circulation with out a corresponding increase in productivity does not produce any more actual money at all. It simple alters the conversion factor between money and goods and services. Psychologically, however, people may temporarily feel they are richer. It is this temporary feeling that politicians may unwittingly be after. Unfortunately, there is little evidence our politicians understand the true nature of fiat money.
What do politicians understand then. Who knows? But we do know that human nature favors putting more money in circulation in ignorance of changes in productivity. When the amount of money in circulation increases relative to productivity, the real cost of existing, fixed-interest debt declines! In our current, debt laden, U.S. economy, we favor this. We should all plan our long range finances accordingly. The thing that may interfere with our long range plans, however, is the lack of enthusiasm with which our trading partners, that have their own fiat currencies, view our plans.
It's an interesting observation that the U.S. gets money into the economy by the government spending it into the economy in exchange for goods and services the government desires to purchase. The Government, to pay for these goods and services, then takes money out of the economy by taxing it out -- taxes are therefore one of the things that gives our money value, and one of the things that will cause us to work to gain money. If the government spends more into the economy than it withdraws via taxes and fees, the difference is equal, to the penny, to what we call the deficit. The opposite situation produces what we call a surplus. It isn't possible to create continuous surpluses without destroying the economy. About this, there can be no question. But the question of whether it is possible to create continuous deficits without destroying the currency and the economy is a question I want to avoid.
