Strauss “Money printing” or QE alone does not create inflation....

Strauss

“Money printing” or QE alone does not create inflation.

Inflation appears when there are bottlenecks or shortages in the economy. If demand exceeds the productive capacity in a given sector, then that sector will respond by raising its prices.

But if a company or sector has plenty of idle capacity, then they respond to rising demand by increasing their production, not by increasing prices.

Current situation in most western economies:
*labor shortages: none (on the contrary, record jobless rates)
*commodity shortages: none
*capacity utilization: low

That’s why the setup is for deflation.

Another factor to consider is this: Where is the QE money going? If it’s just sitting in bank reserve accounts, it will not have an inflationary effect. If it’s getting funneled into the stock market, it will fuel rising stock prices and crash the market when QE is withdrawn. Neither of these will cause price inflation for goods and services.

Gold, bonds, currencies all are saying QE is coming to an end. The market is never wrong.