|
Inflation is something governments try to manage. If they can keep the rate at around 2%, they're happy. What they and economists don't like is instability. Inflation shooting above that 2% threshold into 4% or higher? They don't like that. It means too much of a shock on the changes in purchasing power and that has repercussions in the economy at large.
They also don't like deflation. Right now the American economy is at a risk of deflation because of the possibility of dropping demand. If demand drops prices drop, and if prcies drop then production drops, and if production drops wages drop, and if wages drop then demand drops...etc... It's called a deflationary spiral and it could potentially be more nasty than a moderately high inflation rate because of its loop effect.
The printing of money, though it will cause inflationary pressure, is also used to bolster the stock market. If the stock market is bolstered, then companies have the capital to expand business operations, which is good for the economy. If demand can be generated with this expansion, then inflation will be kept in check. That's the plan.
The alternative might be stagflation or that deflationary spiral thingy I mentioned. I say go for it.
The bigger issue isn't the printing of money, it's the borrowing and spending of it when the economy is doing well instead of paying down debt.
__________________
Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön
Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot
|