Freaking Out About Helicopters - GS Thinks that Hyperinflation is Unlikely

Fed's balance sheet expansion to 2TR+ has made many people worried about hyperinflation materializing as soon as this year. GS has recently published a report 'Hyperventilating about Hyperinflation', according to which the worry is hugely overrated. Here's the simple argument:
1. The reason why inflation comes in the first place is "too much money" chasing "too few goods". Inflation tends to lag output gap (potential - actual GDP) by about a year.
2. Output gap will average 7% in 2009 and 2010 according to relatively optimistic economic forecasts - still the worst performance since WWII. To close that gap in a year you'd need 10% growth rate - who thinks we'll be back to even 3% growth anytime soon?

And before the output gap closes, Fed will have plenty of time to unwind it's balance sheet, thus reducing the risk of hyperinflation massively. The key is understanding that most of Fed's facilities are short-term: TAF, CPFF, AMLF have maturities of 90 days and less, and account for $700B of Fed's balance sheet (or 2/3 of 1.1B expansion). Most of other money is in swaps to foreign central banks, that also can be unwound relatively fast if the economy actually starts heating up.

Thus buying double short treasury ETFs (like PST) because you hope for hyperinflation in the next couple of years is not the greatest idea. Hyperinflation will happen only with a) rapid economic recovery b) complete inability by Fed to unwind its facilities. You're much better off with just buying equities that will rally hugely if a) is indeed the case, but don't need b) to come true.