Economic Perspective: Printing Money

NC State College of Agriculture and Life Sciences professor Dr. Mike Walden working in a recording studio.


“Today’s program looks at printing money. Mike, I’ve heard people say that the federal government is financing its programs during the coronavirus by simply printing money. Is this true, and if so, is it bad?”


“Well we have two sets of programs here. We have a set of programs that have come from the President and Congress. We call that in economic terms fiscal policy. They’re actually being financed by borrowing. They’re adding to the national debt. We have a second set of programs that are coming from the Federal Reserve. They’ve actually set up loan programs for state and local governments, for banks, for small businesses. Now those are the programs that are financed literally by the Federal Reserve printing money. That’s really how the Federal Reserve gets its resources. They literally do print money although today they do it digitally rather than with paper.”

“Now the two can actually be related because when the federal government borrows money they go to the borrowing market, and they issue something called treasury securities. They’re a very well sought after investment. Oftentimes the Federal Reserve will go and buy those investments. And of course they buy them with printed money. So printed money is all over this rescue plan.”

“The concern that people have about it running up the inflation rate is certainly a valid concern. I think that’s one reason why we need to keep as many businesses afloat because ultimately inflation results when there’s too much buying related to too little supply. There’s more people trying to buy things, and there’s not enough to supply. So if we keep businesses afloat so they’re ready to come back after the virus that’s actually a way of mitigating inflation.”

Mike Walden is a William Neal Reynolds Distinguished Professor in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.

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