In a recent article, I wrote: “Don’t these inflationists realize that expectations can suddenly change, like a dam bursting? This is not in their models. They are the sorcerer’s apprentices. If they go too far in expanding the FED’s balance sheet, people are going to stop believing that they will ever exit. They will begin to expect endless inflation. The dam will break and a severe inflation will occur.” I’m not alone in saying this. I’ve run across an article in the Journal of Monetary Economics (2011) by Professor Lee E. Ohanian of UCLA. He has an explicit math model … Continue reading What if Another FED QE Causes Inflation Expectations To Jump?