Here is the speech Fed Chairman Ben Bernanke will give today. Pay attention to the section on inflation. I am very concerned at the almost dismissive attitude about the possible inflation risk.
We have had unprecedented action by the Fed and Treasury and the supply of money has exploded to before unimaginable levels yet, the thought of hyper-inflation is met with an “oh we’ll just withdraw liquidity lickety split”. Oh…that easy is it?
But, what if the inflation is met with no growth? Then what do we do? All the commentary of the subject just assumes growth returns and Fed action then foloows the playbook. Withdrawing liquidity in a no growth (or negative growth) environment suppresses activity and then will cause another perhaps deeper recession and this one is accompanied by rising prices (see late 1970’s). For those not sure, this is very bad.
Why isn’t anyone asking Bernanke about this scenario? I have watched the Congressional hearings and the question has not come up save for Ron Paul and he is dismissed as a kook for lack of a better word.
This is troubling…
Disclosure (“none” means no position):