INFLATION: something to worry about. “Independent central banks don’t do what this Fed has done. They leave such fiscal action to the legislative branch. By that same token, Mr. Volcker’s Fed had to avoid financing the large (for that time) Reagan budget deficits to be able to bring down inflation. The central bank was made independent expressly so that it could refuse to finance deficits. But is there a political consensus that the much larger Obama deficits will not pressure the Fed to expand reserves to buy Treasury bonds?”

UPDATE: A hedge-fund reader emails:

The Fed announced at their March meeting that they’d buy Treasury debt, and they’ve been doing so for several weeks. It’s called
“quantitative easing”, which sounds so much better than “printing money”. I’m afraid that horse has left the barn.

Yes, and if you look at how much Treasury debt they’ve bought, well. . . it’s easy to see why the Chinese are worried.

ANOTHER UPDATE: At Charlie Foxtrot, a request for advice on how ordinary people can prepare for runaway inflation.