by Dr. Roy Cordato
Senior Economist, Emeritas
Loose monetary policy, i.e. the Fed creating lots of new money, is the cause of inflation. And yet, with “quantitative easing,” you know QE (insert your number), the Fed has been flooding the market with new money for a number of years now and, from all reports, it’s not causing inflation. So where is all the cash going. Well much of it is going into generating a new stock market bubble and also into bank reserves, in other words it is not hitting much of the market for consumer goods and services. But there are significant exceptions, in particular food and energy where prices are soaring. But here’s the rub, these area are not included in the government’s measurements of “core inflation.” So when we read in the newspaper that there is no inflation problem and we look at our grocery and electric bills and see otherwise, the explanation is that the government’s main and most reported measurement of inflation leaves out a huge proportion of what we spend our money on. Tim Carney writing for the Washington Examiner takes a look at some of the prices that we pay but the government leaves out.