Alan Greenspan warns of US inflation risks

So we all know that there has been a lot of talk about inflation on the horizon recently. And most of it is because of the Fed expanding the monetary base so rapidly without having a clear plan to bring it back down. Now most people believe this is absurd and that mega inflation will never happen in the USA. But now the former head of the Federal Reserve Alan Greenspan is warning of inflation in the coming years.

“I am not talking 3-5 per cent inflation, I am talking double-digit inflation in the US.”

He said inflation in the US may begin to pick up sometime in 2012 unless measures were taken to roll back the huge monetary base.
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With a recovery appearing to start, some are worried a continuation of the current policy will fuel a surge in inflation.

The Fed had recently said it would conclude its purchase of $US300 billion ($351bn) of US government debt by the end of October, and would slow the pace of remaining purchases in order to provide for a smooth transition from an easy monetary stance.

Meanwhile, US employers cut jobs in August at the slowest pace in a year, but a jump in the unemployment rate to a 26-year high of 9.7 per cent reinforced worries a weak labour market could weigh on consumer spending and the vigour of the economic recovery.

Finance ministers and central bankers from the Group of 20 economies on Saturday pledged to maintain policies designed to support economic growth, but left open when and under what circumstances governments would begin to go back on the stimulative policies as economies stabilise.

Alan Greenspan warns of US inflation risks

If you haven't yet seen the scary looking graph of the monetary base it can be found here.

The problem is how can the Fed reign in the money supply. I don't think raising interest rates is in the cards for the forseeable future. So many more people would loose their homes and jobs there would be no one left to pay taxes. And also the Fed needs to keep printing money and expanding its balance sheet in order to keep buying treasuries and toxic assets. And now that the inflation threat is becoming more common knowledge (especially with someone like Greenspan (former Fed Chairman) taking about it openly), I am worried that this will scare off China and others from buying more debt, thus causing the Fed to have to print EVEN MORE money to finance the federal deficit.

So what's Bernanke going to do? No matter what happens I think the next few years won't be very easy for most people. Any comments?

In an interview Greenspan gave to the BBC he's stating that the world will suffer another financial crisis.
BBC

The reason the next crisis will be different is everyone from the Fed, to Congress, Obama, the Treasury, and central bankers in general are all acting to prevent the last crisis. It's too late for that...