When Will the Inflation Hit?

 Posted by on 5 March 2009 at 12:01 am  Economics
Mar 052009

Todd Zywicki at the Volokh Conspiracy discusses this alarming graph of money supply over time:

Sooner or later, this increase in the money supply is going to create tremendous inflation. I don’t know how long it will take. Zywicki notes:

Why has this incredible boost in the money supply had no impact? Presumably because the “velocity” of money has remained low — people and banks are hoarding money, rather than spending, borrowing, and lending it. Assuming velocity rises again, however, we may be looking at an inflationary spiral like we’ve never seen before in this country.

And Peter Robinson notes in his post, “We’ve Never Been Here Before“:

Note, incidentally, the tiny little wiggle at the year 2000. That represents the Y2K monetary expansion, judged huge at the time. There are plenty of people who would argue that the Fed’s efforts to shrink the money supply afterwards — that is, Greenspan’s mopping up operation — burst the high-tech bubble, causing the last downturn. How will the Fed mop up after this expansion?

Of course, other countries have gone down this road before.

And as Stephen Moore pointed out on the Glenn Beck show, “This story does not have a happy ending.”

I think we’re in for some “interesting” times ahead…

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