A few months back many economists were screaming that all the money the Fed was creating via the old printing press would generate a huge burst of highly destructive inflation. It hasn’t — at least not yet. And by considering why this might be, you get a pretty good idea about the idiocy, and indeed the cruelness, of the whole crisis management effort promulgated in Washington.
One easy way to understand why inflation isn’t raging in this country is to imagine a garden hose attached to a fully open spigot. At the other end of the hose you would expect the water to be pouring out. If it isn’t, there’s just one possible explanation: the hose has holes through which the water is escaping.
Now consider where such holes might be in the Fed’s own hose surge. What’s puffing up? Who is getting soaked while the rest of us at the end of this hose are still only seeing dribbles?
The answers are obvious. Big bank balance sheets are puffing up. The stock market is fattening mightily by the day. Bank and market feeders, a few hundred thousand individuals financially blessed by the Fed are sucking up the escaping treasure in historically unprecedented amounts.
So the next time you hear someone marvel that “there’s no sign of inflation caused by Fed policy,” turn off the tube or leave the room. We got a very badly malfunctioning financial distribution system in this country. And the small section of our national garden that’s bearing such abundant fruits these days ain’t gonna provide much nourishment for a hungry population any time soon.