I'm not speaking of government debt, Lee, I am speaking of government, corporate and personal levels of debt. People are now pulling back, paying off debt, saving more, and that decreases the velocity of money, so the government must print more dollars to make up for the decreased velocity. I had always wondered where all the money went when no one had any during the Great Depression. Now I understand it was a function of the velocity of money, and so much 'money' had been created through debt that when the time came to pay off the debt, not enough actual currency existed to do so, resulting in bankruptcies, foreclosures, etc. Sound familiar?
I once saw a photo, years ago, of a man shoveling dollars into a blazing furnace -- that was the Fed, decreasing the money supply during the Great Depression, which further exacerbated the problem. Bernanke, on the other hand, chose to print additional dollars to make up for the decline in the velocity of money. When things settle and the velocity of money increases, he will have to withdraw the newly created dollars or risk overheating the economy again resulting in hyperinflation.
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