My big problem with the baker argument about the counterfitter saving the US economy comes at the end.
[Quote]But the interesting part of the counterfeiter story is that his $2tn of phony money will not create problems even in the long run, assuming that he is eventually shut down. Suppose that the counterfeiter’s lavish spending gets the economy back towards full employment around 2012, at which point he gets nailed by the FBI who finally figure out how to recognise the dud notes.
At that point, the $2tn will be grabbed out of circulation and destroyed. Assuming that the economy is strong enough at this point to remain near full employment even as this counterfeit wealth disappears, then there would be no lasting damage from the episode. [/Quote]
Bullshit. All those formerly unemployeed maids and drivers and home builders and lavish car care specilists and investment advisors all get fired as soon as the FBI figues it out. Then all the employeed are unemployeed again, except this time with skills (how many expert 5star party planners or luxery car maintaince workers do we need???) that the economy doesnt really need. Not to mention all the luxery cars and houses that have little demand but already exist, weighing on future supply/ prices. We go right back into a recession that we were trying to get out of. Maybe we get two less shallow recessions than one really deep one, but there is no way, even at full employment, that the economy could withstand the shock of the withdrawl of the level of stimulus needed to get out of this recession/slowdown, without some pretty major disruptions.
