Printing money

Associated Press:

The Fed on Wednesday confirmed that it will buy $600 billion of long-term government bonds by mid-2011 in an attempt to further drive down rates on mortgages and other debt in the hope of getting lending higher.

It sounds innocuous - the Fed is buying government bonds.  But what does it really mean?  In essence it means the Fed is printing $600 billion in new money (or its electronic equivalent - they don't really need to print the bills, just juggle some figures in their computers) - that is the only place it can get this $600 billion in additional funds. So what is really happening is that the Fed is creating new money like mad, which is a sure recipe for inflation in the long run.