Inflation For 2014?

One has been concerned about inflation with the massive expansion of the FEDs Balance Sheet. We have been following that now for some five years plus. But alas the money is printed but is still not going anywhere. Let us examine some of the details.

First M2 and its annualized change as above. M2 is increasing at a fairly good clip. It has gone from $ 6.7T to $11 T in the past seven years. That frankly is a massive increase. It should spur inflation, but it has not.

Here is most likely why. No GDP growth. The money is printed, it is out there but people are not getting it to spend.

Now look at the Monetary Base. Some five years ago we wrote a piece on the Monetary Base suggesting what would happen. And it has happened.

Thus when we look at the calculated inflation rate it is near zero. Things are going no where. The money is staying with the Banks, they are using it to make more money and it is hidden from the economy.

The above shows the details. The velocity is low, money is not changing hands, except in the banks themselves, which makes them money but leaves the rest of society broke. This is a FED artifact. It also seems to be a hidden fact.

Is we look at M2 and the Monetary Base we see what is happening. Money printed by the FED, flows into the Banks and stays there. The question is; how do we break this log jam, and what is the cost in inflation when it does break.