[quote=Rich Toscano]
…which allows them to spend it on something else. (Of course they may spend it on other investments, perhaps that’s what you are getting at).[/quote]
Most sellers are going to be institutional and they are not going to spend that money on anything that matters for the inflation. Under normal circumstances, this kind of money creation would lower interest rates and stimulate borrowing. But, since short-term interest rates are already near zero, that’s not going to happen now. There could be a wealth effect / confidence effect if these manipulations lead to stock market growth, but probably not much (unless the Fed starts buying NASDAQ stocks directly).
[quote]They can always cut taxes and finance the difference with newly printed money, which as Bernanke famously noted, would be akin to dropping money from helicopters.[/quote]
As Mark Zandi (former McCain’s advisor, hardly a socialist) estimated back in 2008, direct spending on infrastructure and aid to state governments to preventing state-level layoffs is about 4 to 5 times more effective per dollar spent than extending Bush tax cuts.
