Wikinvest Wire

The dangers of printing money

Friday, June 26, 2009

Time Magazine has a nice slideshow up about the danger of printing money. It's a collection of black-and-white photos from the Weimar Republic days, imagery that oddly parallels the Depression era photos in the U.S. with the important distinction that, in the U.S., not printing enough money is cited as one of the reasons why the hard times lasted so long.
IMAGE My favorite photo is above - the return of barter.


AJ said...

Did you know that near the end of the Weimar Republic, the amount of debt they issued went up something like seven orders of magnitude in one year?

Gosh, that would be like going from $100 billion deficits under Bush to $1,000,000,000 billion deficits under Obama!

Duh, if you print more money than necessary to overcome the output gap, you will get severe inflation. I don't see what they're doing now as printing new money, but rather printing money that people lost. The money supply isn't changing as much as everyone thinks.

Greyhair said...

I agree with AJ. Filling the gap created by credit contraction is different than new money.

I still think the risks of deflation far outweigh an inflationary situation near term. And at this point, who knows if the government will have good timing when the time comes to not overshoot and over inflate. I agree with a PIMCO rep. I heard the other day: No inflation near term, a likely return of moderate inflation in 4-6 years (which is why they're buying TIPS right now, whether you think that's a good buy or not).

Finally, comparisons with the Weimar are poor. Post war conditions were quite different then than anything we face now.

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