Serious inflation is coming, maybe sooner than later. The Fed thinks it can control this with reverse repos and term deposits at the Fed. No way. When will the inflation happen?… Look out for increases in house prices. The higher house prices will support more credit, both at the consumer level, and in higher-level financial arrangements. The "bubble" will grow, and support the creation of more private liquid assets, which will in turn substitute for publicly-issued liquid assets, causing the price level to rise.
The last sixteen months have not been at all kind to Mr. Williamson, have they?
I am not holding my breath as far as marking-to-market is concerned.
After all, the U.S. post-WWII data on the Phillips Curve--the relationship between the unemployment rate right now and what inflation will be next year relative to its currently-anticipated value--is well known, and yet Williamson still seems to believe that there is no reason to think that inflation will behave differently when the unemployment rate is 8% than when it is 4%:
Fed Policy Update: The disagreement is over how seriously we should take the Phillips curve…. A monkey could do as well at forecasting inflation as an economist armed with a Phillips curve, or maybe a monkey armed with a Phillips curve.