CAN QE CAUSE INFLATION...? WAS THE GOLD RALLY A MISUNDERSTANDING...?

THE NOTION THAT QE IS NOT "PRINTING MONEY" IS SIMPLY DENYING THE OBVIOUS...

CENTRAL BANKS WOULD NOT BE DOING QE IF THEY DID NOT EXPECT THAT MONEY TO ENTER THE MARKETPLACE AT SOME POINT...

PRINTING MONEY WAS THE GOAL OF QE... THE FACT THAT THE WESTERN ECONOMIES ARE SO DEPRESSED THAT ONLY ASIA CAN "USE" THE NEW LIQUIDITY IS NOT REASSURING...

SO OF COURSE MORE MONEY WILL BE "PRINTED"...

AND MOST OF THAT MONEY WILL REMAIN IN THE BANKS...OR WILL BE INVESTED IN WALL STREET PAPER...

BUT YOU CAN'T HAVE ONE ASSET CLASS INFLATING...WHILE THE OTHERS LANGUISH IN THE DEPRESSION...

SOONER OF LATER LIQUIDITY WILL SPREAD OUT..."SLOSH" INTO THE COMMODITIES MARKET CAUSING GENERAL INFLATION....

THIS WAS REALLY THE STORY OF THE 1970'S... THE DOLLAR WENT OFF GOLD IN 1971...AND THEN A FEW YEARS LATER THE OIL SHOCK HIT...

ASSETS MUST EQUALIZE ...  OIL WAS NOT GOING TO SELL AT 1961 DOLLARS...IN 1981...HENCE THE INFLATION...

HERE'S THE POINT...QE IS WORKING...ITS MASSIVELY INFLATING PAPER ASSETS ON WALL STREET...  THAT INFLATION WILL SLOSH INTO THE REAL ECONOMY VIA COMMODITY INFLATION.... 

EVEN IF CONSUMER DEMAND NEVER "PICKS UP"...  

SO ITS PRICE PUSH NOT DEMAND PULL INFLATION THAT WILL UNDO THE QE GAMBIT...  THERE WILL BE LAG TIMES...THE 70'S DID NOT HAPPEN OVERNIGHT...BUT THEY HAPPEN...

THE SAME WILL HAPPEN NOW... A SLOW RISE IN COMMODITIES TO MATCH THE RISE IN PAPER ASSETS PURCHASED WITH THE FED'S NEW PAPER MONEY...

SO...DON'T BURN YOUR OLD ECON TEXT BOOKS ...JUST YET...