The money supply has ballooned. So where’s the hyperinflation?

It’s hardly newsworthy for me to note that our money supply has been expanded enormously over the last year or so.  “[B]y taking the Federal balance sheet to more than $2 trillion from $928 billion 2008, [the Fed has] created a situation that should have resulted in an epic inflationary spike to accompany the 137% increase in liabilities.  Yet that hasn’t quite happened.”  Why not?  Where’s the inflation?

This article, linked to by LRC today, offers four reasons:

  • “Banks are hoarding cash.”  …and when they stop hoarding, as they’re constantly encouraged to do, the new money which has been created out of thin air will actually be put into circulation.
  • “The United States exports inflation to China, which remains only too happy to continue to absorb it.”  But will that last forever?  China has already called for a global reserve currency to replace the dollar.
  • “Consumers are still cutting back.”  Though, interestingly, many continue to live as if there’s nothing wrong — or perhaps it just seems that way since I live so close to Mordor on the Potomac, which of course continues to thrive.  Nevertheless, spending rates are still down.
  • “Businesses continue to cut back rather than hire new workers.”  Like individuals, businesses are economizing where they can, despite the government’s mad (but which I here mean apparently dishonest) rage for more jobs regardless of their cost.

Read the rest here.

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