Is America about to be Hit with Inflation?

By Dr. Gerard Lameiro

In a recent set of articles and editorials appearing in The Wall Street Journal, inflation, the devaluation of the dollar, and the state of the American economy - all are at the top of the news right now.  With high unemployment - nearly 15 million unemployed - and about one in seven Americans unable to find full-time jobs, the economy is on people’s minds.  Now, there’s new news that inflation - under control for the last few years - is about to take off.  Is this true?  Is America about to be hit with inflation?  Let’s talk about it now...

QE2 is the key term.  What is it?  In this case, it doesn’t refer to a ship.  QE2 stands for “quantitative easing.”  That’s a fancy term for a monetary policy of easy money.  How does QE2 work?  The Fed buys U. S. Treasury Bonds and other assets, increasing its balance sheet.  More importantly, at the same time the Fed spends more money, it increases the money supply.  From economics, we know when there are more dollars chasing after goods and services, prices for goods and services go up.  That’s inflation. [more...]