Twenty months straight of pent up wholesale inflation, over one half of all of the us greenbacks in existence have been printed within the last four years, China, our largest trade partner has seen internal inflation in the 5% range for 2 years, Oil is over $90 per bbl, and we are burning food for fuel and the government is subsidizing it. ALL of the ingredients are there, but we could go one of two ways in the near term. Higher prices could cause the consumer, whose pay has not kept up with Headline inflation, to stop spending again, (the savings rate is already dropping indicating we are close to living beyond our means once again), or the stew that Bernanke and Geightner have so carefully concocted will blow up in their face as they rush past their 2% target straight to hyperinflation. The sad part of all of this is that they have weighted the scale so heavily, that once it starts to tilt one way of the other, it is doubtful that they can stop it. They are betting that they can. In the entire history of the Central Banking System and Fiat Currency in the modern developed world no Central bank has successfully pulled this off, but it is where Bernanke has placed his bet.
The Walmart CEO is not alone. While nobody is predicting hyperinflation next quarter (this is what the administration continually point out, even though many they quote, including 3 FED members, don't discount it as the economy begins to recover), even the most activist of the monetarists and Keynesians are saying that IF the FED doesn't act to remove the Quantitative Easing immediately as the economy turns, we will see dangerous inflation. They just have some kind of misplaced faith in a centralized controlled economy that Ben will pull it off.
