Can someone help me out here?

[Person Man]

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?

[Person Man]

Yeah, me too. Somehow we have to reverse deflation as it would be immoral, on the same token, for creditors to basically increase what we owe to them. On the other hand, perhaps if we went back to just moderate inflation of just 1-2% we could continue to encourage some borrowing destroying a willingness to lend or sell goods in the United States. The point is- how do you get people to start hiring people even if they are making more. Is this a market failure (so many people were irresponsible, that basically to hold anyone responsbile would be tantamount to punishing people for revenge, rather than for rehabilation) or will this soon pass as well?

[Person Man]

So, you all are in agreement with my assesement to a degree, correct? However some predicate action based on simply trying to dismantle the current situation like a defunct nuclear plant. The advantage of that is that we will be prepared for future problem, but it may be too cautious of an approach to create any long term stability.

[Person Man]

The whole thing ($52 trillion)

The 'whole thing' is only $52 trillion?  That's only like four times GDP.

That's about the GDP of the Planet Earth...or close.

[Person Man]

Well, that's pretty much what we have to do, then. When do you think this increase in monetary base start to help us that are now first trying to obtain the economic franchise after college.

[Person Man]

We will get inflation as the fed expands the money supply buying treasuries, if and when the velocity of money picks up again. It was the sharp decline in velocity as folks stopped spending which was the rub here.

Hmmm...yes...but maybe if they had money to actually spend. Maybe there is not liquitity, even if there was good velocity. Then again, how can you up the velocity if Banks refuse to lend?