Inflation: The Last Gasp of the Obama Economic Crisis

American Thinker
"..When inflation is finally addressed, action will likely come too late. The problem with higher levels of inflation is that a new dynamic is encountered. Inflation is a function of both the supply and demand for money. While the Fed has substantial, but not total, control over supply, it has virtually no control over demand. As inflation accelerates, individual and business demand for money decreases. It does so because the cost of holding money goes up as its purchasing power declines.

Under these conditions, money is spent faster to get in front of expected price increases. This behavior appeared during the latter stages of the Carter administration, before the Volcker-Reagan clamps were applied. Under extreme conditions, people refuse to hold money (think Weimar Germany or Zimbabwe). They spend it as soon as they receive it."