"While in theory, 'printing money' should lead to an increase in economic activity and inflation, such has not been the case."A better way to look at this is through the 'veil of money' theory. If money is a commodity, more of it should lead to less purchasing power, resulting in inflation. However, this theory began to fail as Governments attempted to adjust interest rates rather than maintain a gold standard..."...beginning in 2000, the "money supply" as a percentage of GDP has exploded higher without a resulting rise in inflation or economic growth."Monetary policy is 'deflationary' when 'debt' is required to fund it."
"In 2000, the Fed 'crossed the Rubicon' whereby lowering interest rates did not stimulate economic activity. Instead, the 'debt burden' detracted from it."With each monetary policy intervention, the velocity of money has slowed along with the breadth and strength of economic activity..."Despite perennial hopes that economic growth and inflation would arise from lower rates, more government spending, and increased 'accommodative policies', each iteration led to weaker outcomes."To no surprise, monetary velocity increases when the deficit reverses to a surplus. Financial surpluses allow revenues to move into productive investments rather than debt service."In an economy saddled by $82 trillion in debt, the debt is no longer productive as more debt is issued to cover ongoing spending needs. This is why 'monetary velocity' began to decline as total debt passed the point of being 'productive' to becoming 'destructive'."
"Country A spends $4 Trillion with receipts of $3 Trillion. This leaves Country A with a $1 Trillion deficit. In order to make up the difference between the spending and the income, the Treasury must issue $1 Trillion in new debt. That new debt is used to cover the excess expenditures but generates no income leaving a future hole that must be filled."Country B spends $4 Trillion and receives $3 Trillion income. However, the $1 Trillion of excess, which was financed by debt, was invested into projects, infrastructure, that produced a positive rate of return. There is no deficit as the rate of return on the investment funds the 'deficit' over time."
"As this money is used for servicing debt, entitlements, and welfare, instead of productive endeavors, there is no question that high debt-to-GDP ratios reduce economic prosperity over time. In turn, the Government tries to fix the 'economic problem' by adding on more debt."