Tuesday, November 16, 2010

Print A Bunch Of Money And Stop

I didn't make it all the way through my graduate monetary economics course, but one thing I do remember from it is the policy prescription for a country dealing with hyperinflation caused by governments being a little bit too fond of running the printing presses in order to pay their bills. Basically the idea is have one last trip to the printing press and print a massive amount of money so you can, in fact, pay your bills, and then...stop.

We don't have hyperinflation, of course, and if anything deflation is the concern, but the point is that sustained inflation requires a sustained increase in the money supply. One giant helicopter drop wouldn't cause sustained inflation.