When Lehman Brothers announced bankruptcy and the economy went into a recession, the Fed did its best to avoid a 1930s like scenario. It pumped a lot of money into the economy to maintain liquidity and help businesses survive.
Now that the economy is recovering, the Fed will have to act in the opposite direction in order to control the surplus money in the system or we’ll have to face a period of high inflation. Several economists have emphasized the need for the Fed to act before it is too late. [Read more…]