Japan engaged in quantitative easing for a decade and never had inflation. Correct. Instead they had the "Lost Decade" of economic stagnation, as it is known t

Japan engaged in quantitative easing for a decade and never had inflation. Correct. Instead they had the "Lost Decade" of economic stagnation, as it is known there (and here). It's actually been much longer than a decade now (it started in the early nineties). A few weeks ago it cost the governing party, which has been in power for 53 of the last 54 years, control of the government. Money follows the law of supply and demand as much as anything else. When the supply of it (relative to the supply of goods and services) goes up, the price (value) of it goes down: inflation. So one of two things has to happen: either the Fed lets that money stay in circulation, triggering a boom in the short term followed by inflation in the long term, or they start sopping it up and "burning" it, which will trigger a downturn. Think about it this way: if all we had to do was to trun on the printing presses to make economic magic happen, why wouldn't we do it all the time? Inflation is the worst form of taxation, because it causes such massive economic distortion, as we've recently seen in the housing market. The Fed pumped up the money supply and people watched their home's valuation go up 10% or more a year. They then made bad economic decisions based on the false idea that it was real. And now we have the current mess.