The problem is not the money supply. It is output and growth. Money isn't wealth. Production is.

Printing more money aka lowering interest rates to zero didn't work in the 70's. Why should it work now? ZERO interest rates to banks is only going to increase the amount of money going after a shrinking supply of goods and services. The result is inevitably inflation which is a tax on everyone.

Borrow and spend aka bailouts won't work either. Sure, it was a good idea to avoid a run on the banks in November; but that job is done. Where are these trillions going to come from? Tax increases aren't going to pass. Congress is incapable of cutting spending. The only other option is to borrow the money. In effect, you are taking wealth out of the economy by borrowing just to put it back in someplace else. And at the same time, you now are obligated to pay interest on that same money for the rest of time the way things appear. The effect is a net loss to the economy, long term drag on our budget deficit, and a devaluing of the dollar aka rampant inflation.

Increasing taxes on the wealthy while letting inflation eat us alive was the recipe of the 70's. You are punishing people who save and invest. The result is they will do less of both. At the same time, inflation will raise everyones tax bracket. Eventually taxes designed to go after the rich will squeeze everyone (remember the alternative minimum tax?). Why work harder under these conditions?

That's my two cents.

James
Beverly, MA

The dollar value is the only intelligent answer. Just look at the charts of dollar vs. Euro against light sweet crude and the correlation is obvious.

When everyone thought the credit mess was only effecting the US; the dollar sunk. As Bernanke and company seemed to abandon inflation in favor of bailouts and rate custs, it dropped to $1.50 per Euro and oil skyrocketed. As Asia and Europe starting melting down and Latin American currencies dropped by 20-30% overnight; the dollar rose. Now everyone agrees Europe will inevitably cut rates. The dollar has since gone $1.28 per Euro approaching par.

Suddenly US Treasuries don't look like such a bad investment anymore. Even gold has had the bottom fall out of it. Now, the conventional wisdom is that if we are in a global recession; the US will lead the way out again. Decoupling theories seem ludicrous now.

But if you want to do a witch hunt and burn oil speculators at the stake; go ahead. Profiting from the misery of others is bad kharma anyway. I vote for televised public executions. Makes for good advertising opportunities....