After all, it's worked so well SO far...
One analogy to explain the looming inflation might be to consider a flood control dam. The water that builds up behind it during the winter and spring could be considered QE1, QE2, QE3, etc. The face of the dam would be the current moribund economic activity indicating a very low velocity of money as exampled by such questions as “Why do I want to borrow if no one wants to buy? or “Why do I want to buy when I don’t have a job?” Now stagflation happens when the reservoir gets so full with QE’s that some water just has to go over the top, even though economic activity remains anemic.
But when the economy picks up money begins to actively circulate. Water infiltrates the face of the earthen dam just as money moves through society. Now the increased velocity of money reveals the previous latent power of the QE’s, and the pressure shatters the face of the dam. Just as a wall of water scours out the stream bed and washes all before it, inflation now rages through the economy and destroys people’s financial asset values and their purchasing power.
Wow. The Dow is very near 14,000 now.
ping
Thank you for posting this, 1rudeboy. I like the way Dr. Higgs has outlined the facts.
Yet economics is not my forte - I think he is saying we’re in very deep trouble, that unemployment is
not going to improve - true?