So, now the plans is for one branch of government to buy 1.2 trillion dollars of bond from a different branch. Sort of like me borrowing money from myself to pay a credit card bill. I wonder how long our Chinese financiers will allow this BS to continue.
http://news.yahoo.com/s/ap/20090318/ap_on_bi_ge/fed_interest_rates

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The Fed is not a government branch. It's simply printing more money or increasing the money supply. Given the massive deficit that Obama inherited and the money that needs to be spent to revitalize the economy, I was afraid this would happen eventually. It will help get the economy going, but it'll devalue the dollar and cause some inflation. This is different from borrowing from the Chinese, which theoretically has to be paid back, but yes, they must be getting quite worried about the value of all those T-bonds they're holding.

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Past MB's: '96 E300D, '83 240D, '82 300D, '87 300D, '87 420SEL

And printing more money will contribute to devaluing the dollar, if this continues we'll all be walking around with 10k bills in out wallet and it still won't be enough to buy a loaf of bread.
That it will help the economy get going is your opinion not fact, I don't share that opinion with you.

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It won't get the economy going. At best, it will keep the economy afloat, until new injections are needed.
This kind of band-aid therapy ain't gonna work. Period.

...and for as long as the understanding prevails, that challenging fat-a$$ money suckers equals developing socialism, we are facing an upstream battle.

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Damn right. We went from Millions to hundreds of Millions to Billions to Trillions in less than a heart beat. Anybody notice?

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It's not my opinion. That's what the Fed is trying to do and generally it works if it's forceful enough, with some consequences of course. Our chief problem is frozen credit due to toxic assets. If you can make these toxic assets "disappear" (by buying them with freshly printed money) it's quite likely banks will start lending again and maybe help create another bubble. The big question is is 1.2T enough to get rid of all the toxic assets, probably not.

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2004 VW Jetta TDI (manual)

Past MB's: '96 E300D, '83 240D, '82 300D, '87 300D, '87 420SEL

So I wonder how much a new Mercedes is going to cost after this inflation kicks in?

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It's a fact that the fed is doing it, whether or not it will work is your opinion.

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Obama got news that two Brazilian soldiers were killed over the weekend. He was visibly distraught and was heard asking his top advisers "how much is a Brazilian anyway?"
Million, trillion......

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Increasing the money supply always stimulates the economy when the supply is tight. Every economist knows that and it's not an opinion. However it's not necessarily a good way to stimulate the economy. It can do more harm than good, especially in the long run.

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2004 VW Jetta TDI (manual)

Past MB's: '96 E300D, '83 240D, '82 300D, '87 300D, '87 420SEL

It always devalues the currency furtehr impoverishing the people who can least afford inflation. It's a hidden tax imposed by the government that subsidizes industry and pays-down debt using currency of reduced value. The value of currency never recovers, it merely stabilizes.

I'm thinking a return to the gold standard isn't as crackpot a suggestion as I once thought. Or the iridium standard or the platinum standard. Whatever. Something NOT under the control of politicians.

I-N-F-L-A-T-I-O-N..........

It's just a matter of time...

"Return with us now to those thrilling days of yester-year..."

...when the prime rate was 20% Bought my first house in 1980 with a 14.5 percent mortgage...and was glad to get it!

This time around, it will be worse...

I think it will work. It is actually right-out-of-the-book action to prevent a massive deflation of the economy. They will contract the money supply later with big increases in interest rates. The reason the money supply can take a big increase right now is because so much of the existing money supply is locked up on the sidelines, the idea is to prime the pump with these dollars, which will result in exisiting money flowing again, and if that is how it shakes out, Obama is going to be a hero, otherwise, he's a zero. Also, compared to the total money supply, which IIRC is about 40 trillion or so, 1.2 isn't really a huge amount.

From my understanding the Gold standard made things even more difficult in the Great Depression with its inflexibility to manipulate the money supply. It's an antiquated system that I doubt we'll ever return to, not that the current system is perfect, but it does seem better.

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2004 VW Jetta TDI (manual)

Past MB's: '96 E300D, '83 240D, '82 300D, '87 300D, '87 420SEL

That's one perspective -- politicians placing blame on something over which they have no control. In furtherance of the philosophy that political control is a public good. By that argument many people believe, and forcefully argue, that FDR did not spend enough money to get us out of depression.

On the other side are the people who argue that had FDR done nothing the depression would not have lasted as long as it did, in effect blaming the New Deal for exacerbating a bad situation.

I think under different circumstances both arguments might be right.

By analogy, think of a private company in financial distress. It could be that a big infusion of capital might save the company. It could also be that the company has some fundamental problem that no amount of money can solve.

Which situation are we in now? Damned if I know. The Administration is forcefully taking the argument that incurring great debt now will ameliorate the situation. They could be right and I hope (genuinely) that they are right. It would be best for the country if they are right.

On the other hand, it could be that we are more similar to Japan at the end of the 20th Century. Their real estate bubble exploded and the central gov has tried for over a decade to spend the country out of its economic doldrums. I bet that the Japanese politicians complain every year that Japan needs to spend more money.