[Alberta's Child]

Everyone posting on this thread should take some time to understand two basic economic measures: money SUPPLY and the VELOCITY of money. If there is a money supply in the system of $2 trillion and the Fed injects another $1 trillion while nothing else has changed, you get immediate inflation of 50%. Every dollar has lost about a third of its value.

But if the money supply is $2 trillion and half the economy shuts down over an unforeseen meltdown, the Fed can inject another $1 trillion without any inflationary consequence because it is increasing the money supply by $1 trillion to make up for the $1 trillion in lost economic activity.

INFLATION isn’t really the concern here. The Fed is trying to stave off a potential period of DEFLATION.

[C210N]

Is there an issue with the lessening impact of increased money, with an increased debt? That is, injecting $1T with a debt of $1T has big consequences.... does it also follow that injecting $1T with a debt of $23T has less impact?

[JayGalt]

Thank you. This is a subject I struggle with. Any insight is welcome.