PBS NEWS HOUR:
GREG IP: I think, when people hear that the Fed is printing money, they draw a straight line, saying that leads to hyperinflation, and they start imagining situations like Germany in the 1920s.
Now, first of all, that is analytically off-base, because printing money only creates inflation if the money gets lent and then gets spent. And neither of those things are happening right now. And, in fact, this week, we learned that underlying inflation is the lowest in over 50 years.
But there is another concern here, which is that, when the Fed buys bonds, it’s in essence financing the government deficit. Now, most economists think that is probably a necessary thing right now. A little bit of government borrowing and lower interest rates are just what the economy needs.
But there are some people worried that this is the beginning of a slippery slope towards essentially the government — or, I should say, the Fed — printing money to finance our deficits. And that raises a lot of red flags, especially among Republicans in Congress.
