why further qe is unlikely, page-20

Hi Twinsen,

Good post and I totally agree.


It's not just an increase in money supply though, that increased money supply needs to be circulating.

From my readings, 'money' has been increased by some trillions of $ over the last 3 or 4 years, but most of it went to banks ... and they have NOT put it into general circulation yet.

The banks are hoarding it as protection against a repeat (or worse) of the 2008 crisis.

I believe inflation is much higher than official figures show, but once that huge amount of money begins to circulate prices will skyrocket (= the value of the 'money' will drastically fall and you'll need $10 to buy what $1 used to).

Prices are rising now, but that's not due to increased demand/decreased supply. It's a sign of inflation due to the decreasing value of the $.

To see this is so, you only have to price things in terms of some real and tangible asset - you could use oil or gas or cotton but my favourites are obviously gold/silver. If you do this, you can see that in the main, prices are NOT going up - it's just that the 'value' of the dollar is going down.

fwiw


dub