Question/Comment: It’s been a long time since I took Econ. 101, but as I remember, if you keep printing ever-greater amounts of currency, inflation takes on a life of its own. Isn’t that what we’ve been doing at the rate of $150 billion per year for Iraq, all off budget? Plus won’t we compound that problem with any incentive package to stimulate the economy? I can’t believe all those new dollars aren’t partly at the root of our current problems. That’s got to represent at least a couple percent of our $10 trillion economy and, as I think I remember, is the difference between boom and bust. [I] always enjoy your stories.
Paul Solman: A slight correction, Tom: That’s a $13+ trillion economy in GDP, which is the final price of all U.S. goods and services, plus a $9.2 trillion national debt.
Will the Iraq war, plus the off-the-books Social Security surplus (right now, it’s subtracted from the official deficit), plus the actual deficit, plus the Fed’s lowering of interest rates all lead to a flare-up of inflation? You could say the falling dollar is already a symptom of this, since what inflation means is that your currency is worth less. As to what’s around the corner, I have for 20 years or so quoted John Kenneth Galbraith, whom I once heard say: “There are two kinds of economists; those who don’t know the future and…those who don’t know they don’t know.”