Bagus' Bernanke Rebuttal - Redux

http://www.zerohedge.com/news/bagus-bernanke-rebuttal-redux

Money printing cannot make society richer; it does not produce more real goods. It has a redistributive effect in favor of those who receive the new money first and to the detriment of those who receive it last. The money injection in a specific part of the economy distorts production. Thus, QE does not bring ease to the economy. To the contrary, QE makes the recession longer and harsher.

The injection of new money into the economy reinflates old bubbles and generates new ones. Most importantly, QE facilitates government deficit spending — additional distortions and rigidities in the economy. Malinvestments can endure. Factors of production are not shifted to places where the consumer wants them to be most urgently.

Thus, QE2 would be better called, "Quantitative Straining," "Quantitative Destruction II," or "Crisis Prolongation III."

Or we might name it after the intentions behind it: "Currency Debasement I," "Bank Bailout I," "Government Bailout II," or simply "Consumer Impoverishment." Finally, we might also name it after its essence: "Money Printing I and II." Or, if we follow Bernanke, who pointed out that most of the new money is created in a computer, we can call it "Money Creation I and II." This might be the most neutral term.

The rhetorical tricks should not distract us from the fact that QE is simple money creation. The aim of Money Creation II is to finance government spending, debasing the dollar. We should dismiss the term QE and instead call money creation what it is: inflation.