Musings in the life of an internist, cardiologist and cardiac electrophysiologist.
Wes,Of course there are problems with just printing money, but what's interesting about the current situation is the willingness of folks around the world to gobble up our debt. It is all about having faith in the financial system and as battered as we are, we are still in better shape than most other countries we share this planet with. So if you have money to invest these days, where do you put it? The stock market? corporate bonds? real estate? the mattress? Apparently many have decided T-bills are the safest bet and countries like China are not particularly happy to buy them, but they realize if they don't, the 600 billion of T-bills they hold will become worthless and their main customer for their exports will dry up and negatively effect their economy.Comparing our situation to Germany after WW1 is not very fair. Germany had been decimated by the war and was being straddled with huge reparations from the rest of Europe for its' aggression. So to compare us to an economy destroyed by a bloody war that came out on the losing end is a very different situation. In printing money, the German goverment was printing IOUs, but no one had faith in them and there were better places to invest your money; a situtation that does not seem to exist today.The problem will occur as our (or someone elses) economy rebounds. Then capital will flee to that sector, and we may then develop the same inflation that occurred in Germany. History also showed that it is not a smart idea to sit by and watch all the banks collapse along with the stock market as President Coolidge did at the beginning of the great depression. So as scary as it is, what choice do we have?
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