How does massive liquidity pumped into the economy cause inflation?
Here is my list: 1. Massive liquidity pumped into the economy can cause inflation. Liquidity floods result when there is too much money on the sideline suddenly moving back into the market. The sudden buying drives asset prices higher, triggers higher yields in debt securities, devalues the dollar, and raises worries of inflation. 2. High commodity prices can be a drag on economic recovery and push up job losses. 3. US Treasuries for the 5, 10, 30 year denominations roses on concerns the fed would have to raise interest rates sooner than expected. 4. Consumer spending is unlikely as households are weighted down under tremendous debt and trillion of lost dollars of net worth. More households are falling behind on their mortgages. 5. The fed may respond by buying more treasuries to keep the interest rate low, but incurring more public debt. Has the Fed stepped in enough to keep interest rates low by buying up treasuries fast enough? Will treasury yields plateau at 3.86 percent or surge h
