Hello everyone,
I've been trying to figure something out for a while now and I'm hoping someone here can help me. I understand that most people consider QE to be a bad thing because it devalues the currency and can lead to inflation and all that jazz. But wouldn't core inflation only occur if we are utilizing all of our manufacturing capacity?
Our current capacity utilization is 77 percent while some other economies operate at 85 without inflation. I understand that the fed will probably reduce the level of QE in the future in response to increasing economic strength. Why not use QE much more aggressively and only reduce it in response to high inflation? There will be more money in circulation but factories could simply manufacture more goods to meet demand. Prices would not necessarily rise until manufacturing fails to meet demand, at which point the QE could be slowed. When we are at a higher capacity utilization, businesses will expand to meet future demand and QE can continue. It seems like a fast way to grow the economy.
Also, legal issues aside, why wouldn't it work for the US to literally print money to pay some of its debt while capacity utilization is low?
I've been trying to figure something out for a while now and I'm hoping someone here can help me. I understand that most people consider QE to be a bad thing because it devalues the currency and can lead to inflation and all that jazz. But wouldn't core inflation only occur if we are utilizing all of our manufacturing capacity?
Our current capacity utilization is 77 percent while some other economies operate at 85 without inflation. I understand that the fed will probably reduce the level of QE in the future in response to increasing economic strength. Why not use QE much more aggressively and only reduce it in response to high inflation? There will be more money in circulation but factories could simply manufacture more goods to meet demand. Prices would not necessarily rise until manufacturing fails to meet demand, at which point the QE could be slowed. When we are at a higher capacity utilization, businesses will expand to meet future demand and QE can continue. It seems like a fast way to grow the economy.
Also, legal issues aside, why wouldn't it work for the US to literally print money to pay some of its debt while capacity utilization is low?
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