You have got to be fucking kidding. You need a serious education in economics. Yes, the Fed can print money into infinity but in doing so the price or real assets such as gold will soar leaving worthless pieces of paper in its wake. The more the Fed prints the more <B>WORTHLESS</B> paper FIAT money becomes. Take your butt straight to the library and start reading about the histories of Fiat Currencies. Throughout history they have all ended the same way and the US dollar will eventually collapse. When? Who knows, but it will collapse when the international community begins to say, "no thanks."
Quote from ptunic:
The Fed is easily capable, willing, and has already begun to address aggregate demand for money (money supply * money velocity).
They brought short term Fed rates to near 0%.
They are in the process of bringing long term debt to under 2%.
If needed, they will increase direct purchases of other long term debt such as mortgages, including sub-prime and junk bonds, as needed, to reduce interest rates closer to 0%.
If that still isn't working, they will electronically print more money and buy S&P futures and stocks.
If that still isn't working, they will work with the federal government to distribute the money more directly through tax rebates, as well as construction and other public works projects (this is already happening).
If that doesn't work they can give every citizen $20,000.00 USD, electronically printed by the Fed.
If that doesn't work, they can give $1 million. Then $1 billion per citizen. Then $1 trillion. They electronically printed $1 Trillion in under 6 hours at one point already (AIG etc). At one point, that is vastly under $100,000/citizen imo (probably closer to $20,000 at the maximum), inflation in housing prices and other asset values will take hold again and money velocity will decrease at a lower rate than money supply increases.
While I totally agree, money has different forms today than it used to, that can easily be correct by the Fed simply adding 1 digit to the amount it normally prints. This is an oversimplification and is of course done over months, hopefully it makes my point
Not that I am recommending this in the slightest, just the power they have is unlimited in terms of creating inflation, and with Bernenke the will is there. They would rather cause 20% annual inflation than risk default for example, and this probably is a smart move.
The real solution involves making inflation-adjusted cuts to government spending and moving closer towards a budget surplus instead of away from it. The big problem now is we have been living way past our means.. and the government's solution to bad debt has been to replace one form with another, instead of face the politically challenging true solutions. If we want to spend so much money, we need to increase taxes for it. If we are past the Laffer curve, then spending has to be cut. 10% deficits are unsustainable, and may put us at risk of shocks even greater than those recently experienced. Thailand, Argentina, and Iceland have some experience in this. We are a larger economy and the world's reserve currency, which is a huge help in reducing default risk, but this advantage does not confer unlimited resources to us. We must pay the piper, and we will, the only question is when and it what form and with what pain. The longer the delay, much like a rubber band snapping, the bigger the pain of adjustment when it comes due.
