Jane Bryant Quinn Makes Better Sense Than Me, As If You Didn't Know That

Jane Bryant Quinn makes some good points, echoing McTeer and making the point that the deficit is not terrible as yet:

"Isn't any increase in the deficit a bad idea?

Not when the country stands on the brink of a financial disaster. Besides, the deficit -- although large in dollars -- isn't a problem at the moment, says economist Irwin Kellner of Dowling College in Oakdale, New York. It amounts to about 2 percent of the economy, well below the 6 percent deficits of the early Reagan years or 4.5 percent in the early Clinton years. The deficit will rise as the recession advances but not primarily because of the rescue activities.

Is the bailout inflationary?

No. When the Treasury sells securities to the public, it's neither inflationary nor deflationary. You are simply using money that otherwise might be invested elsewhere and investing it in government securities, instead.

The Federal Reserve, which manages inflation, is making short-term loans to financial institutions that can't borrow elsewhere. It can lend without limit. The institutions put up various types of collateral and the loans are expected to be paid in full.

The Fed earns interest on these loans, typically 2.25 percent but sometimes higher -- so it's making money. It will also buy short-term commercial paper from corporations. That earns interest, too, which will help cover losses if any of the paper goes bad.'

Read the whole post.

I wish I was as sanguine. I worry about inflation and the deficit down the road, but, given where we are, I suppose I'm going to be in the minority.