The inflationary set-up: 2020 is not a case of déjà vu
18 May 2020 | by Peter Warburton
If the large-scale asset purchases (QE) undertaken by the US Federal Reserve in 2009-13 failed to propel the US economy in an inflationary direction, why should we expect a different outcome today? Isn’t this the definition of insanity? In refuting this charge, it is necessary to understand more clearly why the central bank interventions provoked by the GFC did not foster an inflationary environment. Essentially, the GFC was a car crash in which the vehicle’s dimensions were compressed. Think of the Fed as the driver’s airbag and the government as the emergency services attending the scene.