Monday, October 4, 2010

Another Failed Stimulus

Some economists and politicians advocate more stumulus on the view that more government spending is necessary to increase aggregate demand to create jobs and reduce unemployment.

Critics of further stimulus worry that cranking up the government printing press to print more dollars risks inflation.  The critics can put their hearts at ease.  The Federal Reserve Board was set to release the new $100 bill on February 10, 2011. Unfortunately, the special paper on which the currency was printed creased during passage through the Bureau of Printing and Engraving's high-printing machine. On October 1, the Fed issued a press release announcing the problem and delay until further notice.

No matter.  The Bureau cannot print $100 bills fast enough to stimulate aggregate demand, as a majority of them ultimately  circulate overseas.  To really stimulate demand, the Bureau should resume printing $500 and $1,000 bills to put real purchasing power in the hands of American consumers.

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