The congressional proposal to mitigate American citizens' high cost of gas by passing out $100 checks to all taxpayers is the clearest, most explicit example of Bernanke's "helicopter money" policy yet. How much cash is this anyway? On the web I see that in 2003, there were almost 140 million US federal tax returns filed. Lets round that up to 150 million for 2005. If every taxpayer gets $100, that is $15 billion. So, this is not a huge factor compared to the entire US economy. It could have a significant effect on the K-mart set. But it would have no effect at all on the high income end of the economy. Maybe the best thing you can say about this policy is that it reduces income disparity instead of exacerbating it.
So why not issue $100 checks monthly? How about $1000 checks? What difference would it make anyway? The Fed can issue as many bucks as it pleases, at virtually no cost. Unfortunately, the more checks they issue, beyond the token $100, the faster prices will inflate. Capital flight, from dollars to gold, will accelerate. The Fed generally prefers to distribute dollars in the form of debt, rather than passing out party favors. Debt is a the rationalization for money creation.
No one seems to notice that there is more to energy-cost inflation than oil company profits and geopolitical issues. There is also the issue of US government's, and governments' worldwide, monetary inflation. If the US inflates the US dollar supply by 8% in one year (they did this in 2005), that alone will drive up the price of oil by 8%. Oil is priced in US dollars! As the dolllar goes down, oil goes up. On top of that we have a geopolitical oil shortage.
Since a month ago, when the Fed stopped publishing the M3 money supply numbers we don't know how much the Fed is inflating. The $15 billion they propose to pass out to mitigate gas prices won't, by itself, inflate oil much. Rather, oil price inflation (property inflation, insurance premium inflation, gold price inflation, you-name-it inflation) is caused by governments around the globe frantically pumping cash into the banking system in a desperate effort to keep the international trade system flowing. This money spreads everywhere, via the easy-credit pipeline. All those credit card offers we get in the mail? The money they are offering to lend us comes from the Fed. They badly want us to go out and spend.
Its easy to inflate the money supply. Much harder to inflate the oil supply.