Andrea Terzi — Searching hard for Taylor’s inflation

In February 2011, I was in the audience of a lecture given by John Taylor on the “exit strategy”. One main theme was that the policy of the Fed called “Quantitative Easing” meant a high risk of monetization and inflation, if not hyper-inflation, in the U.S. economy. In the Q&A session, I asked Professor Taylor why he thought that “monetization” is inflationary. I argued that Quantitative Easing boils down to portfolio shifts in banks’ balance sheets, and that asset reallocation does not seem to be causing an increase in demand, nor a price increase. His answer (that I quickly noted in every detail on a piece of paper) was:…

Any day now. We have a model. :)

Money And The Real Economy
Searching hard for Taylor’s inflation
Andrea Terzi, Professor of Economics, Franklin College, Switzerland