Will Ego Save Us From Inflation?

Back in 2009 when so many were crowing about coming inflation, I was not worried at all.

Prior to QE and other efforts that have ballooned the Fed's balance sheet, it seemed pretty straight-forward the Fed could ward off inflation simply by over-raising interest rates, trading a slower economy for out-of-hand inflation.

Bernanke wouldn't hesitate to do this, I thought, because he wouldn't want to be known as the Fed Chief who let inflation - something that hasn't truly damaged the economy since the early 80s - out of the bag.

But as we delve deeper into new and inventive Fed initiatives to manage the economy, I wonder if the ego I once counted on to guard us may not soon turn against us?

It is clear to me (and seemingly to most other economic prognosticators) that the solution to our economic woes lies primarily in the Legislative and Executive branches in the form of clarity around fiscal policy  - as well as health insurance, regulation, tax policy, military efforts, etc. 

The answer clearly does not lie with lower interest rates.

But the Fed continues to bait the markets with potential QE3 as the next dose of medicine which will do nothing but allow our elected representatives to delay further tough decisions as the stock market feels an artificial high even as the job market deteriorates.

Ego, it seems, cuts both ways.  Should Bernanke not soon come to his senses and realize he alone cannot save the economy, the "stimulus" he creates may become so convoluted that an exit strategy which controls inflation is not so easily achieved.