Inflation is Looming and Hiding in Plain View

The mirage cannot continue in the face of rising interest rates.

The U.S. government has printed an unprecedented amount of money since 2009: more than $10 trillion with a probable $6 trillion more on the way. Yet inflation has remained subdued, even though the CPI increased to 5% over the last two months, which some say is shocking.

Soak this in. New money printing now exceeds the total cost of our most expensive wars. The money supply has increased 250%, but inflation has remained low. Economists explain that this phenomenon is due to extremely low velocity. In other words, money is sitting in bank vaults going nowhere.

That’s somewhat true, but most of that money went into the stock and bond markets, exacerbating the great wealth divide and creating a “money illusion,” the mirage that stocks and bonds have become tremendously more valuable – stocks have become 300% more “valuable” in the past decade.

Hidden inflation

We’ve had serious inflation, but don’t know it because the barometer we use to measure it ignores security price inflation. The Consumer Price Index (CPI) measures increases in the prices of goods and services, but that’s not where the money went until recently. We are beginning to see inflation in CPI because some of the $5.2 trillion in COVID relief went directly to consumers.

We’ll be seeing more.