The Federal Reserve has already injected hundreds of billions of new dollars into the economy since the recession started. Normally, when the government prints up more money, dollars are worth less and that is what we call inflation. But inflation has been surprisingly low.
One measure of the money supply, M1, which includes currency as well as checking accounts, soared by 26 percent between August 2008 and September this year. The amount of currency more than doubled. But prices barely changed.
As Fed Chairman Ben Bernanke goes forward with plans to print up another $880 billion, someone has to ask why the past increases didn't produce the inflation that everyone thought they would.
So where did all that new money go? Many blame businesses for hoarding cash. Obama recently said: “corporate profits are doing just fine. [But] they're holding onto a whole bunch of cash -- they're kind of sitting on it.”
But that isn’t happening. Companies don't just keep huge piles of cash lying around. Even if they aren't spending the money, they are putting it in the bank or they buy bonds. In either case the money is recirculated to others, not hoarded. Companies are indeed wary of starting projects and with all the uncertainty they face. And who can blame them? Yet, they are not the ones making the money disappear.
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2 comments:
Obama isn't playing chicken he is a chicken !
the whole party is standing in poop.many people to blame.lets face it,all govt today is in it today for the money....you will not see ethics hearings,but the propeganda will be as good as any administration can produce.thats what the political science degree is for.
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