If the Fed printed that much money, interest rates would go sky high on expectation of inflation. This would effectively destroy the long term lending markets, consumer demand for large ticket products including housing, and business investments.
That makes no sense as the printed money would only be replacing the magically 'disappearing value'.
Yes but psychology may send interest rates sky high anyway- at least temporarily. Just look at what happened in Indonesia 1998, or Britain 1931-- high interest rates first, debt deflation afterwards.
