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timber, I agree with you there is currently minimal inflation...

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    timber, I agree with you there is currently minimal inflation that is caused directly by the Fed's QE program, since the money is being locked up by being deposited at the Fed. (This in no way says the QE program produces no inflation)

    The fed then micromanages the inflation by tweaking the interest rates - by lowering the rate that is offered to banks depositing at the fed, banks are more incentivised to take their money out and spend/invest it in the economy, and increasing inflation in a controlled process.

    The monetary base is expanded for a significant period of time until government budget surpluses and high interest rates remove it from the economy again. The net flow of newly created money from the QE program is very large, and very far, from zero. (And by created I mean created, every time they purchase a bond on the market). I'm counting money deposited at the Fed by the banks; That's the bank's money, not the fed's money, and the banks can withdraw it and spend it at will.

    However, when the economy fails to miraculously recover as the Fed predicted it would, it'll start pursuing policy to increase the amount of money that's spent in the economy, possibly by reducing the rate banks get by depositing at the fed, and that's when inflation will start to pick up in pace in the economy. The inflation that comes with an increased monetary base is currently delayed and has not arrived in the economy yet.
 
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