Because deleveraging of the banking system produces a deflationary shock. The Fed is trying to offset this, but for political reasons can only partially (people

Because deleveraging of the banking system produces a deflationary shock. The Fed is trying to offset this, but for political reasons can only partially (people would cry "currency debasement!" - and already do). Scott Sumner has written some things on this: http://www.themoneyillusion.com/ http://www.themoneyillusion.com/ The fact that interest rates are very low is also a hint that maybe inflation expectations are not very high. A good source for the relevant interest rates: http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/ http://www.bloomberg.com/markets/rates-bonds/government-bond... (yield column). You can also compare to Japan there.