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Money supply has quintupled in the past year, and because of this money printing, inflation is here for the long run. Inflation will force increases in interest rates.
Zero interest rate policy (ZIRP) has propped up bond prices and inflated a stock market bubble. But at what cost and when will it end? How will it end?
The cost of ZIRP has been a quintupling of the money supply that is certain to cause inflation, and the Federal Reserve knows it. The Fed is trying to gaslight investors into thinking inflation will be transitory.
But it can’t control our minds or interest rates for long.
Inflation will cause increases in interest rates despite the Fed’s efforts to maintain control. We’re being gaslighted into believing that tapering will be the cause. Interest rates are going up regardless of who is turning the interest-rate dial – investors or the Fed. Absent Fed manipulation, investors require a return on investment that is above inflation – a real return.
Insane money printing
The U.S. government is poking the inflation bear, printing insane amounts of money testing to see its inflationary effects. We’ve even out-poked Japan. The M1 money supply has quintupled from $4 trillion at the beginning of 2020 to $20 trillion today and there is a Congressional debate about printing another $4.5 trillion.
Forget the printing press. Money is “printed” when the Treasury issues debt. In “normal” times, investors, including foreigners, purchase this debt, but most of the new debt has been bought by the Federal Reserve. This game reveals itself in the money supply.
The money supply has increased because of spending on quantitative easing (QE), ZIRP, COVID relief and new government programs. Most are noble purposes, but the price tag is imminent inflation. Inflation will increase interest rates, putting an end to ZIRP.
