Can someone help me out here?

[ag]

I have heard that we have record deficits and that prices are falling everywhere. What would happen if we tried to print more money to pay off the deficits and to stabilize spending power? Will that work? Will we just scare people? Will we just encourage them to be lazy?

If you "just print money" (well, in a way you do it already, though, apparently, with the intention of destroying it if things start getting out of hand - I just hope Dr. Bernanke knows what he is doing) with the clear intention of "paying off the deficits" that way you are going to get two things:

1) high inflation (this beast is very hard to control once it is out)
2) great difficulty in borrowing (and likely loss of dollar's position as the world's major reserve currency)

Neither is going to be particularly pleasant. No, people aren't going to be lazy. They will likely work more, consume less, loose whatever savings they have and be, generally, rather unhappy.

[ag]

In order to have high inflation you need one and only one thing: print more money. In the long run (not that long: a matter of a couple of years, really, not likely to be much more) this is a necessary and sufficient condition.  The rest is just a lot of baloney. It's been tried over and over again historically - the result is always the same: you print money you get inflation, you don't print money you don't get inflation. You may want to try again: I am not wishing you good luck, as you aren't going to have any (you might also see what happens if you drop a heavy boulder on your head or if you spill gas all over your house and light the matches - I am not wishing you luck in those activities either).

The only reason why this is not quite working out that way right now (in the "short run") is that printing money is, actually, harder than it seems. Most of what passes for money these days is, normally, bank loans. If banks don't give out loans, the government might be trying to print money, but the actual ammount of money in circulation isn't growing. That's what we are having now: there isn't that much money out there, but more of it has been printed by the Fed and less by the private banks.  Fed has a plausible argument that had it not done anything we'd be in bad deflation - it's, probably, right.

Still, it doesn't mean it is going to be all right.  At present, Fed is hoping to be able to get the moment right and destroy all the money it has printed right at the moment that the banks start lending again. I sincerely hope they are right there - if they are wrong, all of us are going to be deep in stinky excrement for a long time to come.

[ag]

As for people working more and consuming less-- we want people to work more. Not enough people are working right now, which is part of the problem. And people will have to consume less, to build up their savings and start paying down debt. That is already happening and is not necessarily a bad thing in the long run.

Sure. Work more (forever), earn less (in real terms, forever), consume less (forever) - if that makes you happy (in the long run), I am happy for you. But, overall, your country (and, given its role in the world - the entire world) will be a poorer and more miserable place. If you like that, I am not the one to judge your preferences. It is not my definition of a good thing, though.

[ag]

As for people working more and consuming less-- we want people to work more. Not enough people are working right now, which is part of the problem. And people will have to consume less, to build up their savings and start paying down debt. That is already happening and is not necessarily a bad thing in the long run.

Sure. Work more (forever), consume less (forever) - if that makes you happy (in the long run), I am happy for you. But, overall, your country (and, given its role in the world - the entire world) will be a poorer and more miserable place. If you like that, I am not the one to judge your preferences. It is not my definition of a good thing, though.

Working more is bad? So you want the unemployment rate to stay at 9.5% and the broader measures of unemployment to stay at 16%, and the average workweek to stay at 33 hours or less? I think we must be talking about different things. America would not be a poorer and more miserable place if Americans worked more than they are today. We were working more a year ago and we were a happier place.

On the consumption side, I am not calling for reduced consumption, but I do not see how Americans can consume more in the short to medium term than it has been in recent years. If you have a plan for how this could be accomplished, I'd love to hear it.

No, that's not the "working more" I have in mind. What will happen is that you'd be working longer ours in crappier jobs for a lower (real)wage to make ends meet: you'd need to work longer ours to buy necessities. Leisure would become too expensive. Of course, that doesn't mean you'd be able to find the job - high inflation is, generally, not very condusive to high employment (and, eventually, when they start fighting it, you'll have another very nasty recession with high unemployment). But conditional on finding the job you'd make sure you work your ass off.

Savings - yeah, savings wouldl grow, out of necessity (nobody would lend you, so you'd need to save). And, given that you'd have destroyed the dollar you'd be giving it to those Europeans with their euros, so that they'd have better lives.

[ag]

It's been tried over and over again historically - the result is always the same: you print money you get inflation, you don't print money you don't get inflation.

No, that's not the case, as Japan shows.

You have to remember that you're speaking from a historical understanding that is within the Keynesian period, which presupposes reasonable capacity usage in an economy.  Neoliberalism has eliminated a lot of what used to be thought of as normal in an economy, and in the new deflation and dearth-of-demand economy (or rather the return to the 19th century) that we live in today, printing money is only going to slightly counteract deflation.  To create inflation in the current system is very, very difficult.

I am sorry, but I can't understand a word you said here: to my taste it's just gibberish, noise devoid of any distinguishable sense. Keynesian/neoliberal/ancientmarsian - these are all just theories about how the world works (well, the first two, at least), not the world itself. There has never been a "keynesian period", nor there is a "neoliberal period"  (in fact, if I were to listen to your "neoaustrian" friends the world is now run by keynesians - not that I can understand what they mean by it, nor that it matters at all here). If you print money you get inflation: there is full agreement on this point between neoliberals, keynesians or whatever: you won't find an economist who disagrees.

Now, as I myself said, it's not that easy to print money in a world, where most money isn't printed by the government but issued by the banks: if banks don't want to lend, major increases in "monetary base" (that's what the government "prints") won't do much to increase the money supply. So, the Fed is increasing the base by staggering ammounts, and there is no inflation - yet. However, this is only so because the economy is still in deep sh**t: the moment banks start lending the Fed will have to start reducing the base ("destroying money") - or else. And one just hopes they do it at the right moment: if they do it too early, there will be another recession, if they do it late - inflation will rear its head (and to kill it they will get into another recession). They hope they will do it right - so do I (I have nothing else to do but hope: my wage is fixed in dollars). But they aren't planning (hopefully) to "pay the debts off by printing money" - if they do, you guys are all badly screwed.l