Is printing money really a bad thing?

On a discussion board for an accounting class I'm taking, somebody made a comment to the effect of our government is currently printing money and so the economy is just a house of cards that will come collapsing down at any moment. Here's my response:

"Whether it's really bad for the government to just print money is an interesting topic. In effect, that's what the quantitative easing strategy deployed recently by the Fed amounts to. Instinctively, it would seem like a bad thing. The dollar's value will slide to nothing if the Fed just prints endless quantities of it. Countless examples of this exist around the world in the last few centuries. However, what if the government just prints a relatively small quantity of money relative to the overall supply? Obviously, the dollar still falls in value, but not to zero if done on a limited scale. And what are the consequences of the dollar falling in value? First, our buying power of foreign goods will drop. We won't be able to be quite such a nation of excess. We'll produce domestically more of the items we consume because it will become economically efficient to do so. This will create more jobs. We'll also produce more goods for export because other nations will have more buying power with respect to the goods we produce. Again, more jobs in the US. Certain aspects of our material standard of living might be reduced...primarily cheap electronics from Asia and the cheap plastic junk that you find at Walmart won't be as cheap. But the trade-off is there will be far more opportunities for America to actually produce goods and services again. Personally, I'm willing to accept a smaller TV and less plastic junk in this trade.

Of course, there's always the risk of devaluing the dollar to practically nothing. But there's actually very little risk of that for one simple reason. Numerous countries have devalued their currency to being worthless, but they virtually all share one crucial difference with the current situation in the US. In countries like post-WWI Germany & Hungary, or Argentina, or Zimbabwe, the people in control of monetary policy (i.e. printing money) were/are not the same people who actually held the bonds that underlie the value of the currency and they did/do not hold significant assets with values denominated in that currency. By contrast, in the US, the members of the Fed, as well as the political and economic leaders with the clout to influence the Fed, hold significant assets that are dollar-denominated, including large amounts of the bonds that underlie our currency. In Post-WWI Germany, the people who set monetary policy had little incentive to maintain a sound monetary policy because it was foreign investors who stood to lose the most while they themselves stood to lose little from a default on their currency. Our situation is very different. The people who set our monetary policy stand to lose tremendously if they allow the dollar to default.

And what's more, global investors seem to agree. Even with the announcement of quantitative easing (printing money), there has been no flight from dollar-denominated assets by foreign investors. Clearly, they also realize that the US does not have adequate incentive to destroy its currency. A moderate devaluing of the dollar will actually offer us a number of competitive advantages that will correct our trade imbalances and probably bring more jobs back to the US. People who understand these issues far better than myself are for the most part betting that a devaluation without default is by far the most probable outcome."

A lot of that information comes from Niall Ferguson's "The Ascent of Money".