Submitted by: Donald Hank
The gist:
The Fed's creation of money with QE 1 and 2 was predicted to result in inflation. Indeed there has been galloping inflation. However, since the Fed was keeping that new money in reserve, the inflation was probably not linked directly to that money printing binge, because this new money was not lent out by commercial banks. It just stayed put.
However, author Robert Murphy (see below) is saying that this newly printed money will be lent by the banks, and at that point, there is a real risk of inflation -- for the same reason as there was inflation in the Weimar Republic, when people took their salaries to the bank in wheelbarrows. That untenable situation led to the Third Reich.
Some fear is not unwarranted.
Don Hank
On the Brink of Inflationary Disaster
by Robert P. Murphy on August 25, 2011
Ever since Ben Bernanke began his massive infusions of money into the financial system, many analysts (including me) have been worried about the severe weakening of the dollar if and when the fractional-reserve-banking system magnified the initial injections severalfold.
Although the trend could reverse, data from the past two months suggest that the inflationary big one may be upon us.
