The Simple Accountant

Letting the Reinflation Genie Out of the Bottle

Mr. Corcoran asks "Will policy makers exhibit the necessary good judgment to know when it is time to put the brakes on for this massive injection of liquidity?"

We should hope so. Watch the velocity of money. It has been dormant. When it starts to move up, in conjunction with the massive liquidity, then the genie could escape the bottle, and the inflation trade will be on. Long GLD / short TLT, for example, may produce spectacular winners, but the economic consequences would be ugly. Perhaps better to preserve capital or make small gains in a stable economy, than to make occasional windfalls in an unstable one.