Federal Reserve myths that refuse to die - economystified.blogspot.com

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View entire post at: http://economystified.blogspot.com/2014/04/pop-econ-federal-reserve-and-inflation.html

In today's post, I want to address the following bit of conventional wisdom, that nicely represents "pop econ" thinking:

"When the Federal Reserve prints money, it always leads to inflation."

What makes this statement wrong is the "always."  Increasing the number of dollars in existence can cause inflation.  Might.  May.  It's possible.  

However, a lot of the time - it just plain doesn't.

Take a look at the below charts.  I won't offend you with too many details (you can learn some nitty gritty here), but Chart B shows the amount of cash in existence, in the US economy.

Chart A tracks the CPI - line going up means prices are increasing, falling is decreasing.

Plain as the nose on your face...between Fall '08 and Fall '09, the Fed stepped up the rate it milled cash.  Yet at the same time, prices were falling.  We had an injection of cash without inflation - in fact, prices fell - a period of deflation!

Continue reading at: http://economystified.blogspot.com/2014/04/pop-econ-federal-reserve-and-inflation.html