Sep 112012
Someday, hopefully next year, the American economy will come back to life. Banks will begin to lend, the money supply will expand, and the velocity of money will rise. Unless the Fed responds by reducing its balance sheet, inflationary pressures will build rapidly.
At that point the cost of our current monetary policy will be all too clear. Like Mr. Obama’s stimulus policy, Mr. Bernanke’s monetary expansion will ultimately have to be paid for.