When we eventually stop expanding the money supply, is there any reasonably possible scenario where the Fed Reserve will be able to manage this without the markets and the economy suffering? With food and energy prices consuming more and more of the typical family's budget, what industries will prosper and which will likely suffer the most as we try to unwind the expansion of the country's balance sheet?

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Posted by foshizzle

Washington DC metro

Member since Mar 2008

40599 posts

Posted on 2/17/13 at 3:17 pm to Sparta

Poliboard.

Besides, there is no particular need to stop the expansion of the money supply.

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Posted by TigerFanDan

BFE

Member since Jul 2008

1003 posts

Posted on 2/17/13 at 9:39 pm to foshizzle

I guess it is better to print more money that is worth less.

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Posted by djmicrobe

Planet Earth

Member since Jan 2007

4970 posts

Posted on 2/17/13 at 10:03 pm to Sparta

Ask Walmart's VP. A reduction in the printing press will likely be a disaster for Walmart.

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Posted by foshizzle

Washington DC metro

Member since Mar 2008

40599 posts

Posted on 2/18/13 at 7:16 am to TigerFanDan

quote:
I guess it is better to print more money that is worth less.

The money does not necessarily become worth less. It's something taught in intro to macroecononomics.

The quantity theory of money (this is good old Friedman's idea) states that money supply x velocity = prices x economic output. Velocity (the number of times per year a given dollar gets used) generally doesn't change much, so often this is simplified to:

money supply = prices x economic output

So if economic output increases (which tends to be true most years) then it's a good thing for money supply to increase slightly too in order to keep prices stable.

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