deflationary or inflationary, page-62

My turn.
The injections of liquidity into the financial system in recent days/weeks/months is NOT inflationary because these dollars are short term loans only and will return to the Fed (+ some interest). That's merely the Fed doing its thing as lender of last resort since the banks wont do any lending.

But there's been more happening than that. The Fed has also been lending money longer term and taken dodgy mortage backed securities as collateral. THIS activity (and Paulson's proposed bailout) is the stuff to worry about since the bad investments being taken as collateral are (most likely) over-valued. In effect these debts are being monetised at their notional value by the Fed, since, lets face it, the Fed aint getting their money back from the banks that proferred them in the first place.
There's your new money...I think.
My head hurts.