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The problem is that money is just a governmental IOU backed by taxes.  It isn't an asset as far as the government is concerned, it's a liability.  In a functioning system, people are willing to accept those IOUs because the government is good for them, but the amount of debt involved now is beyond the ability to issue money to cover (i.e. there is no way to raise enough taxes to back that much money).  Pumping more money into the market is just pumping more bad paper into the market.  It may devalue existing debt by devaluing the means of paying the debt (money), but it can't devalue the debt as much as the assets that supposedly backed the debt have devalued, so it won't fix anything, and lenders will continue to insist that more hard assets be put on the table to balance the bottom line.
by rifek on Fri Oct 24th, 2008 at 04:54:07 PM EST
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