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Rubbish article. From the comments section:

The distinction between “printing” and “creating” money is unimportant. It doesn’t matter whether the money is printed on paper or issued electronically. The bottom line is that the money supply still increases, and in the long run that activity ends up destroying the value of each unit of currency. I couldn’t help but notice that you deliberately overlooked that fact in your article.

You wrote, “Federal Reserve did not purchase direct government debt- but rather purchased mortgage backed securities and other asset-based securities, NOT government bonds.” Actually, we don’t know that for a fact. We do know that they purchased mortgage-backed securities, otherwise known as “toxic assets” because if valued at their true value they would be worth far less than their face value. We also know that they purchased these securities by creating money out of thin air. But that doesn’t mean that the Fed hasn’t been purchasing direct government debt. To the contrary, the government has been running out of buyers for its debt. All the biggest buyers, including China, Japan, and Russia, have dramatically curtailed their purchases, and they will likely continue to do so.

Of course, the Fed is an opaque organization, so there is no way to know exactly what they’re doing. That’s one key reason why Cong. Ron Paul has called for a full, public audit of the Fed, and not the sham audit the government currently conducts.

Despite the fact that the Wall Street Reform and Consumer Protection Act of 2010 included only a watered-down version of Audit the Fed, we got a quick glimpse of Fed activities from the revelations that came out of that law. Yet, even that quick glimpse tells us that the Fed bailed out the leading European banks as well as banks in other countries via the discount window. This money was also created out of thin air, yet the Fed told us nothing about it before they were forced to do so. So how can you be sure that the Fed isn’t buying government debt? The honest answer is: you can’t.

You wrote, “Third, it’s actually irrelevant to discuss printed paper money, since it represents a tiny portion of our money supply. The vast majority of our money supply is electronic- not paper money.” You know perfectly well that the term “paper money” is euphemistically used to describe the entire money supply. Some of us refer to this as the “fiat” money supply, but we unjustly get shot down for using that term, too. So what term is acceptable to you, Mr. Luko? After all, if not for the fact that our money is based on paper, we would not be at a place where electronic money could be increased ad infinitem at the whim of the Fed.

You wrote, “Fourth- our money is not worthless, it represents value- either assets or labor, so it’s not worthless.” Then why does it keep losing value? Why is today’s dollar worth less than 4 cents compared to the 1913 dollar? If that’s not worthlessness, what is? Does it have to reach zero before you’ll admit it’s worthless? If so, you have a craven view of “worth”.

You wrote, “Based currency (money based on gold) has already been tried, and proven to be very unsuccessful.” No, that’s not true. Rather, the gold standard was undermined by the government in collusion with the banks by permitting more paper/electronic/fiat money to be created than was actually held in reserves. This inflation of the money supply is what led to all the troubles you described in that paragraph. Blaming gold for these developments is like blaming store owners for the fact that there are thieves that rob those stores.

You wrote, “Sixth- inflation- a dynamic and growing economy needs ‘some’ inflation.” This is a long held truism that has not a shred of evidence to support it, and I cannot help but notice that you continued that tradition by refusing to provide any evidence to support your wild claim. You simply stated that your truism is true, as if stating it proves it. Inflation, specifically monetary inflation, is nothing more than the stealing from the poor and the middle class by the rich, via destruction of the currency.

Lastly, I want to address your statement, “The Federal Reserve and fiat currency system has produced the highest standard of living for the highest percentage of Americans in its history- as well as reducing the percentage of people living under the poverty rate in America.”

This falsehood has been the rallying cry for decades, but it simply isn’t true. The quintessential point is the famous gap with the rich getting richer while the poor get poorer. This isn’t just a fancy political claim. It also happens to be true. Just because dollar amounts increase doesn’t mean that the poor are better off. To the contrary, the dollars buy far less than they used to.

The truth is that the poor should no longer be poor. Poverty should be eradicated by now, and it would have been if not for the fiat money system. The rat race should be over, but it doesn’t end because the middle class finds that their goals are always just out of reach, like a carrot dangling on a stick. Again, this is due to the fiat monetary system where the value of the unit of money keeps decreasing over time. This tendency for the dollar to always lose value over time is the greatest theft in the history of mankind.

More later.

Inflation, specifically monetary inflation, is nothing more than the stealing from the poor and the middle class by the rich, via destruction of the currency.

Sorry, not buying this part of your argument. First off, class-warfare statements are so abused that I automatically look for proof - and by the way, isn't part of your argument that he just declares that inflation is good without support? Your statement that it supports class warfare is just as unsupported.

The fact is inflation devalues "paper" (meaning wealth not directly tied to real property) and enhances the value of real property. The real beneficiaries of inflation are those who owe others money in loans. Taking a home mortage as an example - without inflation $100k loaned for a house retains the same value as the house. With inflation someone can borrow $100k for a house and some time later have a $200k house for no more money. In that way, the value of "paper" (the $100k) has reduced relative to the value of the real property. This is one of the reasons loaners charge interest - to keep up with the losses they would otherwise suffer through inflation on money they loaned to somone else instead of using it to buy some real property of their own that would appreciate rather than lose value.

The majority of those who owe money today are middle class with their mortgages and car loans (plus lower-middle-class recent college graduates, who are basically screwed every which way). The middle class is the primary beneficiary of 'moderate' inflation.

Basically, the net effect of inflation depends on the relationship of inflation to interest rates on loans and return rates on investments. Inflation should be considered "low" if paper (e.g. stocks, bonds) returns more than investment in real property, and "high" if real property gains relative value over time.

The problem with 'deflation' is that it removes any incentive to loan money, and loans provide the most effective opportunity for new growth in real value.