Helicopter Ben fires up the engine

So as Bernanke once promised/threatened he might, the Fed is turning to on quantitative easing.  The markets don't seem to like it much, and why would they?  It's like when your grammar school started having Fallout Drills.  On the one hand, it's nice that they're planning, but on the other hand . . . why bother finishing that math homework?  What do they know that we don't?

For those of you who are not up on the term, basically, the Fed is doing its damndest to print money, hampered by the fact that most of what we now consider "money" doesn't come out of a government printing press--actual currency is only a fraction of our money supply.  It is easy to print little pieces of paper with pictures on them--just ask Gideon Gono.  But most consumers and businesses in America are not set up to take large payments in cash.  So instead, the Fed is going to buy up about $1 trillion worth of securities in order to flood the market with new money. 

Do any other old codgers out there in my audience remember back when $1 trillion was a noteworthy figure, rather than the minimum price needed to get people to take your policy seriously?

The dollar is down, of course, since this means that there will be a lot more of them in circulation, making each individual dollar less valuable.  The stock market is also depressed.  The gold bugs are laughing all the way to the bank.

Will this work?  Damned if I know, and I bet Bernanke doesn't either.  It should work, in theory.  But while in theory, theory is the same as practice, in practice, they differ.  These days, more sharply every day.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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