We are in the camp that, although what the Fed is doing is inflationary, it will not cause higher inflation for a while (perhaps at least a year or more). That is because commodity prices, earnings, jobs, consumer confidence and economic activity are all in the dumps with not much expectation of a dramatic improvement in the foreseeable future.
However, Alan Blinder, a professor of economics at Princeton and a former vice chairman of the Federal Reserve put it cogently:
“At some point, and without knowing the timing, the Fed is going to have to destroy all that money it is creating. Right now, the crisis is created by the huge demand by banks for hoarding cash. The Fed is providing cash, and the banks want to hoard it. When things start returning to normal, the banks will want to start lending it out. If that much money is left in the monetary base, it would be extremely inflationary.”
It's nothing to bet on yet but, if history is any proxy, the unprecedented stimulus efforts will at some point cause same unintended effects. A world inflation bubble might just be that unwanted love child.
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