Back in 2002 Ben Bernanke, then still a Federal Reserve governor, declared that "under a paper-money system, a determined government can always generate higher spending and hence positive inflation." That does not mean it is easy.rnOn March 18th America's inflation rate was reported at 0.2%, year on year, in February. The same day the Fed said "inflation could persist for a time" at uncomfortably low levels. Yet some economists and investors insist high inflation, even hyperinflation, is lurking in the wings. They have two sources of concern. The first is motive: the world is deleveraging, ie, trying to reduce the ratio of its debts to income. Policymakers might secretly prefer to do that through higher inflation, which lifts nominal incomes, than through the painful processes of cutting spending and retiring debt, or default. The second is captured by the Fed's announcement that it plans to purchase $300 billion in Treasury bonds and an additional $850 billion of mortgage-related debt, bringing such purchases to $1.75 trillion in total, all paid for by printing money. It is not alone: around the world, central-bank balance-sheets have ballooned (see chart).
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