Inflation

Perhaps consistent with the old saw that there is more information out there then there is stuff to know about, people have started to worry about the inflation that may arrive when this crisis passes...

Niall Ferguson worries about it... Krugman doesn't... people with numbers compare it to Japan and say it isn't a big deal.

and so on.

A thought experiment: Most of the excess cash has been flushed into banks through the various programs (TARP, quantitative easing, etc.), who have been largely sitting on it to meet capital requirements and because they are scared. Meaning while the money supply has increased, the money in circulation hasn't. In policy terms (several months ago-- I know, I know no one cares about several months ago) there was a lot of discussion of setting capital requirements on a sliding scale so that banks would be forced to lend less of their money when times were good (allowing bubbles to inflate less rapidly) and more when times are bad (stimulating the economy). Say this idea of the sliding scale of capital requirements passes (an idea, I would think, the Obama administration would be amenable to) and, independently, the economy improves-- while lenders are no longer scared they can't go nuts, because reserve requirements are increased which while expanding the money supply avoids huge inflation.

[Obviously, someone smarter than me should correct me if I'm wrong here]

Is this likely? I don't know... But it is something to think about: predicting anything at this stage of the game is a silly thing, since I do think (and would overcome my bias against predictions) that once we are out of the woods, the banking regulations are going to be reexamined.