I see, so in terms of a straight asset swap, there is no inflation as there is essentially equivalent value traded in the swap. That would lead me to believe that the reason there was some inflation, during QE 1, is because the Fed was buying depreciating assets and therefore receiving a reduction in value for their non-equivalent cash swap?
How does QE reduce private sector net income, and would a reduction in private sector net income not be an inflationary effect? As the value in the private sector is essentially temporarily reduced, whilst the equivalent cash amount still circulates?
I understand there are some behavioral effects associated with QE working in tandem with the money supply issues, but I have tried to focus on the money supply side at the moment just to make sure I understood the basics at least.
Lastly and I know this may sound radical but for the purpose of theory, if this: asset for asset = inflation neutral, is correct. Would it not be possible for the Fed to print and swap for high value infrastructure projects (With the associated risks they may not be the right ones(inflation). Or maby even the associated risks that they are too good and therefor over compensate greatly in value, for the additional money in now supply (deflation)?