There is a lot of talk lately about the Fed’s quantitative easing policy. It is an indirect way of printing money, and also a huge mistake. It turns out the Fed can’t even print money the direct way without making mistakes. A new $100 bill that is harder to counterfeit has been rolling off the presses recently. 1.1 billion of them have been printed so far, at a cost of $120 million.
An official familiar with the situation told CNBC that 1.1 billion of the new bills have been printed, but they are unusable because of a creasing problem in which paper folds over during production, revealing a blank unlinked portion of the bill face.
A second person familiar with the situation said that at the height of the problem, as many as 30 percent of the bills rolling off the printing press included the flaw, leading to the production shut down.
The total face value of the unusable bills, $110 billion, represents more than ten percent of the entire supply of US currency on the planet, which a government source said is $930 billion in banknotes.
Coincidentally, these would be the first bills to feature Timothy Geithner’s signature.
Posted in Economics, Monetary Theory
Tagged benjamins, federal reserve, government bloopers, hundred dollar bills, inflation, monetary policy, msnbc, printing money, qe2, quantitative easing, tim geithner, timothy geithner
Telling the truth to one’s superiors is hard. Especially when the stakes are high. Christina Romer comes to mind. Brilliant economist. She’s done excellent work on the role of monetary policy during the Great Depression.
A partisan Democrat, she was summoned to Washington soon after President Obama’s election to advise him. All of a sudden she endorsed the Bush-Obama views on stimulus. This is a 180 degree turn from her previous views. Romer’s own academic research shows that fiscal stimulus’ effects are too small to do measurable good.
Romer the economist believes that most business cycles have monetary causes. Not fiscal. Monetary. Romer the economist had been very consistent in expressing that view. But that view changed as soon as she arrived in Washington and Romer the economist transformed into Romer the political advisor. Suspicious.
This is not a new phenomenon. Politicians from both parties have been using economists for as long as economists have let themselves be so used. Politicians love the air of legitimacy that pointy-headed academics can give to their proposals. And economists love the sudden rush of attention and name recognition — and the professional prestige that will long outlast the current administration. They are happy to sell out. Or is it buying in?
That thought was sparked by reading about F.A. Hayek mourning the death of some of his colleagues’ integrity back during the Reagan years:
“You can either be an economist or a policy advisor.
I have seen in some of my closest friends… how a few years in government corrupted them intellectually and made them unable to think straight.”
-Cato Policy Report, Vol. 5, No. 2, February 1983.
Posted in Economics, Stimulus
Tagged christina romer, f.a. hayek, fa hayek, fiscal stimulus, hayek, monetary policy, Political Animals, romer, speaking truth to power, Stimulus