The deflationists win

[Lone Wolf]

It's been my belief that a sufficiently determined government can bring about inflation (and probably much more inflation than it intends to) by increasing the money supply.

Apparently, I don't know what I'm talking about.  It seems that the government can't even print Ben Bernanke's "helicopter money" properly!

It seems that my "inflationista" butt has now been well and truly kicked in this debate.   All I can do now is hang on madly to my long-term treasuries and pray for forgiveness.  

Edit: To be clear, the above is quite tongue in cheek.  Literal "cash money" in the form of $100 bills and the like is of course a very small part of the money supply (and is also not the method by which the Fed "prints money" out of thin air.)

[moda0306]

Correct me if I'm wrong, but oddly enough, the money that's printed has nothing to do with what economists refer to as "printing money."  I think the $ bills printed are simply exchanged at banks for old ones going bad.

"Printing money," in the sense that it matters to economists, occurs when the federal reserve credits bank accounts of financial institutions after "purchasing" their US treasury bonds (and more recently, mortgage-backed securities).

[Lone Wolf]

Correct me if I'm wrong, but oddly enough, the money that's printed has nothing to do with what economists refer to as "printing money."

Absolutely, sorry if the "tongue in cheek" nature of this post was unclear.  The Fed is of course the entity actually responsible for humping dollars into circulation via open market operations (aka buying bonds with money generated out of thin air.)  When the Fed performs this monetary policy in conjunction with a governmental fiscal policy that amounts to the government either spending money or redistributing cash in some form or fashion, this is the "helicopter drop" that Bernanke refers to in this infamous speech on how to fight deflation.  While Bernanke would not be literally dropping Benjamins from the sky, he is claiming that the effect would be very similar (as anyone in possession of an electronic dollar can exchange it for a crisp bill upon demand.)

The inflationist camp believes that Bernanke is probably right that he can cause as much dollar devaluation as he likes if the government and the Fed work hand in hand in this fashion.  (I happen to be in this camp.)

The deflationist camp doesn't think Bernanke could be anywhere near as successful at doing this as he thinks.

Both camps (as far as I know) believe that such a policy is misguided and harmful, though, and would lead to substantial malinvestments within the economy.