JWM (Must you sign your messages at the top? It appears that you’re cluelessly addressing yourself when you do so): I wasn’t applauding the current Fed policy choices. I’d prefer it if they let a few large banks crash and preserved the value of the dollar. Instead, they are pumping liquidity to bail out lenders and debasing the dollar at the same time.

I think we are pretty much entering a mild recessionary period. But you can’t possibly say that “we are already in a severe recession” given the low unemployment levels we have (4.8% as of Feb 2008!).

Of course high inflation is undesirable. That’s why I said that it would be a cost. The policy aim appears to be to reduce the severity of the blow in the short term in exchange for high inflation, which unfortunately would result in a reduced standard of living for many years.