Money does not drive economic growth. Investment does. Growing the money supply in relation to production (read inflation) can influence investment and economic growth by lowering the price of money (interest rate) and by shifting more of the national income away from labor and toward’s capital. Ironically, today’s labor is capital! Nevertheless, these are not the constraints we face today.
Regime uncertainty, that is government policy is killing the incentive to invest. Banks and multinational corporations already have over $1 Trillion in reserve. So what’s the problem?
Government borrowing is diverting the income our nation has allocated to invest away from investment and government sponsored consumption: subsidies.
And as for inflation: Inflation devalues a currency and forces prices upward. HOWEVER, NOT ALL PRICES ADJUST AT THE SAME SPEED! SOME ARE FAST (COMMODITIES LIKE OIL OR WHEAT), OTHERS ARE SLOW (WAGES). IT IS THE DIFFERENTIAL IN ADJUSTMENT TO SPEED THAT OFFERS INFLATION A PATH TO POTENTIALLY GROW THE ECONOMY. This is where Ben Bernanke and today’s Keynesians are, yet this is dangerous. Any growth in the money supply absent an increase in production leads to massive inflation even stagflation.