On June 14 I made this post on the Locker Room pointing out that it was impossible for Obama’s stimulus package to generate economic growth and, on net, create additional employment. As part of this post I referenced a Daily Journal article I wrote back in January of 2009 when the stimulus plan was being proposed where I predicted that it would harm not help the economy. In this article I also pointed out that it didn’t matter how the stimulus was financed:–by taxation, borrowing, or printing money–it had no chance of working. Here’s what I wrote in January 2009:

…what if the government uses the Federal Reserve and simply creates the money out of thin air? This might have the most devious effects because it imposes a hidden tax. Money creation does not add new resources or wealth to the economy; it reduces the value of the money already in circulation, making existing incomes and money holdings worth less. The devaluation of money is reflected in prices that are higher than they otherwise would be, i.e., inflation.

But spending financed with new money, like spending financed with taxation or debt, also creates a wealth transfer, favoring the political winners. These are the people who get the new money first. Inflation occurs as new money works its way through an economy from its points of entry. When new money first enters the economy those who receive it get to spend the money before prices go up. It is their spending of the new money and the spending of those who come after them that cause prices to rise.

For example, if the president decides to “stimulate” the economy by investing in so-called green energy, those companies participating in the generation of that energy will be the first to receive the new money. Wealth and economic resources will be transferred from those who get the money last. In the process, the cost of production will be driven up for those who receive the new money later or possibly not at all. Not only businesses are harmed. This process is particularly devastating to the poor and the elderly, who are more likely to be on fixed incomes.

So why do I bring this up now. Well apparently the head of the the nations money creating machine–as opposed to wealth creating machine–Ben Bernanke, can’t figure out why his loose money policies haven’t worked to stimulate the economy. This is what Bernanke has had to say about this darn economy that is just not responding to his policies as planned (As quoted in the Washington Post):

“We don’t have a precise read on why this slower pace of growth is persisting,” Bernanke said in a news conference Wednesday afternoon. He suggested that problems in the financial sector and the housing market, and with consumers trying to pay down their debt, had been underestimated. “Some of these head winds may be stronger or more persistent than we thought.”

I guess that’s why he get’s paid the big bucks.