The U.S. economy has escaped inflation despite the Federal Reserve's massive liquidity infusion ... so far.
The inflation-free economy won't last forever, warns Allan Meltzer, a professor of political economy at Carnegie Mellon University, in an article for Project Syndicate.
The Fed has created enormous amounts money by purchasing bonds from banks in its quantitative easing (QE) program.
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1 comment:
We are not inflation free. When the government calculates inflation, they leave food and energy out - the two biggest sources of inflation. They are scamming you with a lie!
Our government is giving away ONE TRILLION dollars a year in their Quantitative Easing program, buying low grade derivatives and other financial instruments for above market value. They do it this way so that you don't think that it's a direct subsidy.
It doesn't take a genius to realize that the more dollars chase a resource, the higher the price that the resource becomes. What's $5 for a pack of gum when you have a trillion more in the bank? It's a rounding error on an hour's worth of interest - totally inconsequential.
Right now much of this money is parked in US Treasuries. By creating artificially low interest rates, they perpetuate unsustainable government spending and create injury to anybody who is legally forced to make these investments (like the Social Security Trust Fund). It's also why the stock market is at record highs, despite an overall poor economy. By keeping the funds in these markets, you're essentially taking it out of circulation. But if it ever goes into the general economy, watch out. The Velocity of Money is a way of measuring how dollars get recycled over time. It's currently around 6.5 and has been as high as 10. Imagine what adding $10 trillion into the general economy would do. The few dollars in your bank account are going to get wiped out.
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