Here Comes Inflation

You can't print trillions of dollars without sparking runaway inflation. It may not be running away, but it's starting to jog:

Federal Reserve Bank of Philadelphia President Charles Plosser said prices may rise 2.5 percent in 2011, a rate well above central bankers’ preferred range, and cautioned against complacency on inflation.

“The economy may be at greater risk of inflation than the conventional wisdom indicates,” Plosser said in a speech yesterday in New York. “While inflation expectations appear to remain anchored, we should not become sanguine about our credibility. It can be easily lost.”

The bank president’s inflation forecast for 2011 exceeds central bank officials’ long-run preferred range of 1.7 percent to 2 percent, and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.

Fed officials will need to raise the U.S. benchmark interest rate and reduce the central bank’s balance sheet when financial and housing markets improve, Plosser said. The Federal Open Market Committee is committed to price stability and will act in a “prompt way” to ensure it, he said.

What do you think's going to happen when bank interest rates start climbing? Millions of consumer are getting notices right now from the major credit card companies that their previously fixed rate accounts are now variable and tied to prime rate. As prime rate rises, consumer credit costs will climb and that will trigger more economic turmoil.

This will not end well for a lot of people.