Why the Fed's "QE3" Plan Won't Jumpstart the Economy - And What Would
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Yes, it would produce an extra $31 billion per month on the nominal Federal budget deficit, but the Fed would have printed the new bills, so there would have been no additional strain on the nation’s finances.
It would be much better than a new social program, because there would have been no bureaucracy involved, just bill printing and helicopter fuel.
The money would nearly all have been spent, increasing consumption by perhaps $300 billion annually, creating perhaps 3 million jobs, and reducing unemployment by almost 2%.
None of these moves would drive the economy into hyperinflation. According to the Fed’s figures, as of July 2010, the money supply was actually $4 trillion LESS than it was in 2008. That means that as of that date, $4 trillion more needed to be pumped into the money supply just to get the economy back to where it was before the banking crisis hit.
As the psychological boost from QE3 wears off and the “fiscal cliff” looms, perhaps Congress and the Fed will consider some of these more direct approaches to relieving the economy’s intractable doldrums.