Wednesday, October 13, 2010
In praise of QE
To better understand this demand problem, suppose that we had a super-effective counterfeiter: someone who could make near perfect copies of $50 or $100 bills. Suppose this person printed up $2tn of counterfeit money and began to spend it on all sorts of items. Our counterfeiter buys up houses and cars. They pay for incredibly lavish parties and trips. They hire all sorts of servants, groundskeepers and investment advisers. What would be the effect of this counterfeiting scam on the economy? In the current situation, it would provide an enormous boost to GDP and create millions of jobs.