Let's say that usually the value of the dollar is elastic - it is subject to inflation and deflation. You can buy more with it, or you can buy less with it. In principle if it is an elastic fluid then you can send waves through it - waves of compression and rarification. Imagine what kind of ripple through the economy is possible, what with one thing and another.
So they say that the government has reduced interest rates to near zero and I wonder if this doesn't freeze the value of the dollar in a kind of pathological state where now it is an incompressible fluid and we can no longer send waves through it in the usual way. In this situation maybe it does not matter if huge numbers of dollars are being printed by the Fed.
Think about pumping an elastic material like air into a fixed volume container. What happens is that the pressure increases. But try pumping an in-elastic fluid into the same container and either the container breaks or the excess slops out to the side, or it backs up into the pump. You just cannot force more material into the that volume. So if we think about the government trying to pump dollars into the system and doing it at the top of the economy rather than the bottom, then maybe those dollars escape off to the side into some rich person's pocket. But they don't actually enter the economy in a meaningful way until the rich person buys something.
The rich person either uses the money to stimulate something in the real economy or else they exchange it with some other rich person for some item. So they could be exchanging $150M homes, or great works of art. And every new dollar that gets printed by the fed and shoved into the system ends up there and...so what? So they buy fancy stuff. Who cares? Unless I feel envy it really does not matter. If a second economy, a Luxury economy, springs up then it really does not matter. Maybe that is why Rubini is so blase about how the bailout is the biggest transfer of wealth from poor to rich in History.
What seems most upsetting is sitting here, a normal person, watching the Obama government supporting a continued pumping of frozen money into the top of the economy. It seems unfair and seems as likely to destroy the economy as fix it. But maybe, just maybe, it doesn't matter. As long as they don't use that money to exercise unfair power over us, as long as we retain our purchasing power. But maybe interest rates should be raised slightly?