From an old (pre-crisis) post by Mish --
For starters MZM and M3 contain credit transactions and money equivalents, not money.
And the distinction between money and credit is a crucial issue. A rapid increase in money supply leads to a Weimar Republic or Zimbabwe hyperinflationary scenario, while a rapid increase in credit eventually leads to a Great Depression or Tulip Bubble collapse endgame.
That last paragraph is a little too cut and dry for me, but only just a little. We have an imbalance between money and debt. If we correct the imbalance by printing money, we get inflation. If we correct it by letting debt collapse, we get depression.
It's why I want to call this monopoly game over, print money, destroy that money by using it to pay off debt, and start a new game ASAP.
From The General Theory:
I am not one to disagree with Keynes. But we went with the lower-interest-rate solution, and all we got for it was debt. Well, it did keep the economy going beyond the 1987 end that Steve Keen points out (see mine of the 25th). And it kept the economy going (if not golden) beyond 1973. That's almost 40 years now of keeping the economy going by accumulating debt. And that's on top of all the debt we accumulated during the golden years, 1947-1973 -- which itself was enough to kill off the golden age.
Oh yeah: Not government debt. Total debt. Mostly private debt, in fact.
We have to keep interest rates low, as Keynes said. And we have to fight inflation by having everybody pay off debt faster. Mostly the private sector.
When we fight inflation by paying off debt faster, we correct the imbalance between money and debt. As opposed to making the imbalance worse by fighting inflation the old-fashioned way. The old-fashioned way: you know, by jacking up interest rates. We'll be doing it soon, again. Making things worse, instead of making things better.