There is a concept I cannot accept. Some people say: The quantity of money must get larger every year because the population grows, and the economy grows. That's fine. But then they add: So the government should just print that extra money and spend it.
Actually, it's not a bad idea. But it makes our money seem fake, like Monopoly money. Let me be first to admit, our present system is no more or less fake. But the present system is much more convoluted and confusing, so the money doesn't seem so fake.
This plays to the "confidence" and "trust" aspects of our economy.
There was an article in Parade not long ago about the Value-Added Tax, the VAT. (See my post of 5-31-2010.) The article said: "some policy experts worry that a VAT could actually raise so much money—and so easily—that it would encourage Congressional waste. 'A VAT would take the pressure off the government to rein in spending,' says Rudolph Penner..."
Now, I'm not sure what it means to raise money "easily" by taxation. But I'm sure it would be "easy" to raise money by printing it. And it would lead to Penner's problem: It would take the pressure off government to rein in spending.
The mathematical reason I cannot accept print and spend as a workable plan is that Federal deficits tend to be bigger than the increase in money justified by growth. Printing enough money to cover the deficit would therefore be inflationary in the old-fashioned sense of the word.
Between 1950 and 2008 the Federal debt increased by about $9.75 trillion. In 2008, M2 money totaled about $8.15 trillion. And M1 money, the better measure, totaled only about $1.6 trillion. Printing money to cover deficits would therefore have led to a great increase in the quantity of money. That is, inflation in the old-fashioned sense of the word.
Interestingly, it may be that after the economic problem is solved, the deficits will be small enough that printing money could cover them and more, and still not be inflationary. At that point, the notion comes into its own and I accept the concept. (In a healthy economy, people wouldn't be so worried about money being "fake.") But unless and until we can run our economy right, printing money to cover deficits will only make matters worse.