I've seen this argument a number of times recently. The idea is that all the Fed money creation is going into the distressed banks, but these in turn are not lending the money out - just using the money to shore up their reserves. Once the credit crisis has passed, the Fed (the story goes) will simply take the money back out of the system (not sure how, raising interest rates?) and inflation won't be a problem.

Here are 2 articles + a video where this idea has come up.

http://www.businessweek.com/magazine/con...

http://www.huffingtonpost.com/hale-stewa...

http://www.youtube.com/watch?v=lE0nlcLyf...

Now, for one, I don't see the proponents of this concept talking about the massive increase in government spending that surely is making its way into the economy. But what are other counter-arguments to this reasoning?