Why do they print money?

I'm a pretty simple guy.  Thinking too deeply about a subject such as the economic crisis gives me a headache.

Really.

Fortunately I have taken to keeping Ibuprofen at my desk at work. 

I have a question for you:  How many of you have been mesmerized by the videos of the government printing money on the TV news shows?  I know I have. Seems every time they talk about the Bail Out, er, I mean Stimulus Package, they show those presses cranking out sheets of $100 greenbacks.  My mind wanders from the actual news story to something like; "Heck, all they have to do is print it. I wish I could print it like that." Next time somebody wanted to borrow a few bucks, or Gail and I wanted to go out to dinner, I could just stop by the ol' color copier.

Then I started thinking about what all this extra money being printed was going to do to the USA.. I have seen it in other countries. About 14 years ago I arrived in Caracas for a weeks worth of business meetings. When I arrived on Monday  I bought Bolivars at the airport for about 440 to the dollar. As I left on Friday the exchange rate was 1 to 800!  Think what this did to purchases made on a credit card!  Restaurants took to putting prices on the menus in pencil. No one trusted anything.  I had my agent ask that I paid commissions to a US bank. Companies knew what to change for goods today, but not ones they would produce next week!

This week I started reading up on the subject of inflation and what the bank bailout and Obama's tax and spend plan will do to inflation. Predictably, most articles look back, not forward, and make alarming statements about inflation being too low, prices dropping, and how to control deflation.  But if you have some  Ibuprofen handy, Google "Inflation" and check the news box and you will see strong opinions  on both sides of this issue.  I, with that image of government printing presses in my head, am sure we will see a return to inflationary times sooner than later.  (Click Here)  The good news is that inflation would cut the real value of the US deficit that is now going out of site.  But the bad news is that inflation generally surprises us. We don't know about it until we read about last quarter.

What do we prepare for inflation?  Number one- don't hold cash (boy that's very contrary advice for today), buy durable goods, and don't pay down long term debt.

In Real estate that means buy at these low prices today, and finance at low rates over the long term.

Do we do this now - or Can we even do this now.?  The answer to the first question is that we yes, we should be preparing to buy now. Look for those bargains in the pockets that have bottomed, and buy. 

Can we do it?  This is a personal situation, but I believe we have to find a way: either by using seller financing, lease purchases, or other more creative financing that we learned when we were starting out.  Guess what?  It's the beginning all over again.

  Oh and why do they print money?  That's easy - because they CAN.   GFous@marketamericarealty.com