Suppose that I came up with a plan to eliminate poverty once and for all: Let’s give every person in the country $100,000. That would enable everyone to buy whatever they want, right? Except who would go to work the next day at the car lot, the sandwich shop, the grocery store, or anywhere else, knowing that they would only get $10 or less, when they had a shopping spree to take care of?
So after a day or two, the vast majority of people in the country would be out of food, and out of gas. Since no one is at work, there are no goods to be had anywhere at any price. People will be screaming for stuff. It begins with craigslist, a man selling sandwiches for the low price of $500. They sell like crazy to the starving.
He decides to open himself up a sandwich shop. The only problem is that no one is going to work for $10 an hour, so he has to pay his people $1,000 an hour. Sandwiches now cost $750 each.
That is how inflation works, although at a slower pace. In 1962, what $100,000 could buy you today could be had for just over $13,000. In 1912, that same hundred grand worth of products would have cost a mere $4,350. As the government continues to put more money into circulation, it takes more and more money to entice people to continue working. We call that inflation. As the government continues to print and borrow money in order to give it to others, it causes more and more inflation.
This is why this so-called economist is an idiot. His plan is for Obama to mint a one trillion dollar coin, and use it to buy debt from the fed. In essence, print the money out of thin air. He claims that this will do no economic harm. Well, of that is true, lets go ahead and mint up 30 of those coins, pay off the entire debt, and then cut every American a check for $50,000. Dumbass. Paul Krugman needs to contact the college he graduated from and demand his money back.