Printing money causes the wrong kind of inflationSubmitted by bobbyw24 on Sat, 11/20/2010 - 08:35
We were watching the descent of consumer prices this past spring. It looked like the CPI would approach zero by the end of the summer...and then head into negative territory.
But then, with all the excitement around QE, we kind of lost track. The feds were printing money intentionally, right out-in-the-open and without even a 'sorry' or an 'excuse me.'
Everyone knew it was 'inflationary.' And it was - to the extent that it inflated the monetary base. But it didn't inflate consumer prices. Why not?
'It's the economy, stupid.'
When an economy is de-leveraging you get a phenomenon that John Maynard Keynes described as 'pushing on a string.' You can push money into the system. But the other end of the string...where you find consumer prices...doesn't move.