Quote Originally Posted by wiggin View Post
Uh? The debate at the Fed isn't what QE will do, it's whether it is necessary to avert a deflationary spiral.

http://www.washingtonpost.com/wp-dyn...110307372.html


(emphasis added)

Look, I'm not saying Bernanke or the Fed have a crystal ball and know precisely what is going to happen in the economy. But they know more or less what effect QE will have on the economy, inflation, asset prices, etc. They are obviously aware of the future inflation concern but frankly it isn't currently an issue and they have lots of well-honed tools to clamp down on inflation in the future if it does become an issue. That's the whole point of the FOMC.

Regardless, this has little bearing on your statement I took issue with, which was this:

Inflation is too low. The Fed is aware of concerns about too high inflation and is making sure QE and other measures (e.g. incredibly low interest rates) don't result in said high inflation. So, conclusion? The Fed is doing their job, trying to keep inflation at a low - but not too low - level. Hardly 'inflating itself out of its debts'.
The problem is that they can't control the inflation that's going to come about because of QE. They are taking the risk of having to fight back an inflation that is much too high at a moment that employment still hasn't picked up.
Quote Originally Posted by wiggin View Post
Exchange rates have little to do with inflation.
Ah yeah, the good old 'our currency, your problem' stance. Well you can try it again, like in the seventies, this time other countries may not feel exactly like there is no alternative to sticking with 'your currency'. With current yields the risk of too high an inflation for US government bonds to be attractive to foreign investors may be in sight real fast.

What America needs is a government that stops attempting to export its problems rather than to deal with them at home.