hyperinflation...

Jayson Pye warned me about hyperinflation a while back. Some aren't so worried about it.

The Bellows » Inflation: Bring It On:

We need not worry about hyperinflation. Or rather, in a world where hyperinflation is a real possibility, hyperinflation is the last thing we’d be worrying about. There are certainly circumstances under which America could face uncomfortably high inflation down the road, the result of which would most likely be Fed tightening and a painful double-dip recession. But there are two key points to be made about this.

One is that “uncomfortably high” given present conditions is pretty darn high. In the midst of deep recession, inflation isn’t nearly as nasty as it might otherwise be. For one thing, when dollars are getting weaker people don’t want to hold dollars, and so they spend them, which is a good way to make a dent in the shortfall in demand. For another, inflation will help housing markets clear. And for another, a weaker dollar should goose American exports.

The second, and related, point is that inflation is one of many concerns that we face at the moment. Fed independence is a big issue, and 20% annual inflation is something we’d prefer to avoid, but so is, say, a 6% contraction in output. I’d love for Congress to allocate all the necessary funds and then turn around and take the necessary steps to rein in the deficit, but given actual political constraints I’m extremely glad the Fed has done what it’s done — I prefer to see some action appropriate to the scale of the downturn taken and roll the dice with inflation.