The complicating factor is whether or not the Fed can remove the enormous excess reserves that its policy has generated from banks before the banks issue fiduciary media by creating credit on the basis of these reserves. Here are the numbers:
On 8/1/08, Total Reserves were $46 b, Excess Reserves $2 b, and the money stock $6,408 b.
On 9/1/13, TR were $2,334 b, ER $2,214, and the money stock $10,215 b
The ratio of money stock to TR on 8/1/08 was 140. Each dollar of reserves supported $140 of money stock.
At the same ratio, the money stock today would be $326,760 b. That is the potential inflation in the system.
Here is Bernanke on how the Fed plans to counter this inflationary potential:
And here is Bob Murphy’s response: