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This speaker overlooks the other side of the coin. Where and how will the spending effects of this new found money play out.

When 'new money' enters an economy is upsets the current basis of value. I will compete against existing buyers and sellers in many ways that will eventually result in inflation of prices, a condition of too many dollars chasing too few goods. More goods will need to be brought into the point of entry of the 'New money' to meet the artificially created demand. who will win, and who will loose in this exchange?
New sources of supplies will have to be created which disrupts the balances of price and demand in the suppliers market. The most efficient suppliers will win and the marginal will fall away. US can produce food more economically than can Bangladesh and other underdeveloped economies. They will loose in the competitive market against cheaper stocks from the US in the bidding war for these 'new dollars'.

  • Mar 4 2014: It is reassuring to know that this author and some people reading this article believe that restructuring loans, bankruptcies and defaults on bonds and other promises to pay will have little negative economic consequences. Tell the municipal bondholders and GM stock holders who lost everything that it' is okay. They were just "Too big to fail?" Savings and other investments attached to cash devalue when inflation happens.
  • Mar 3 2014: Your explanation shows a simplified understanding of economics and money. It fails to explain how the Central banks have been dumping $ trillions in the global economy without significant inflation.

    The deeper understanding requires understanding how money is created. We use banknote money, meaning it is created when a bank puts an asset on its balance sheet. 98% of the assets on bank balance sheets is debt.

    So, in effect, money is borrowed into existence. It has to be offset by debt.

    To truly understand what central banks are doing when they create money, one needs to understand the "near-money". This is bonds and other securities.

    If you take out a loan from a bank, money and debt are created. If you take out a loan from a non-bank, then near-money and debt are created. Money can be created into near money by a bank selling a loan to a non-bank. Near-money can be converted into money when a bank buys a loan.

    And that is what is happening with all this "money creation". Central banks are buying bonds (near-money), taking near-money out of the economy and replacing it with money.

    So, why is that not creating inflation? The near-money was in the hands of the few mega-rich that have more money than they are willing to spend. Taking near-money from them and handing them money in return, does not create inflation as the money is not chasing goods and services.

    Over time, people will pay back the loans that the banks have purchased, taking the money out of the economy. IF before the loans have been repaid, the money starts being spent and creating inflation, the banks have all those bonds, that they could sell back into the economy, pulling the money back out.

    "Money Printing" is really loan creation or transfer.

    Do these poor people have a bunch of bonds that they intend to sell to the government?