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Once the Recession Dies Down, Is Runaway Inflation the Next Threat?

With a steady sledgehammer of bad economic news pounding away, not that many people are thinking about the middle or far-term future. It's understandable. Plenty of C-level people are struggling through budget-time trying to see their way through the murk of 2009.

One individual is thinking beyond the current recession and he's warning about runaway inflation once the recession, now about one year old, runs its course. Those are the views of Prof. F. John Mathis, who heads the Global Financial Services Center at Thurderbird University.
Mathis says the inflation danger is present because as a way to keep the recession from turning into a depression, the federal government has pumped in huge amounts of liquidity into the U.S. economy.

While it may stand for argument whether all that extra liquidity has unfrozen credit markets, the fact is that the amounts are extremely high.

So, with all that extra credit slopping around, what happens during a recovery? "After months of pumping cash into the economy, the Federal Reserve and U.S. Treasury will face the opposite challenge: How do we get this excess liquidity out of the system before we have another bubble?" he asks.

What do you think, that is, once you have a moment to pause from the current crisis?

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