• Economy: We know that the amount of money relative to output (total goods and services) is reflected in inflation. This is ALWAYS a relative relationship. There are no true price controls in any system, only a transfer of risk reflected in capital flows.

• Financial markets: We know that in modern financial markets with central banks and

expanding the monetary base is very different than expanding the broad money supply. Many people think that QE alone is inflationary, but it’s not. At most, QE alone is anti-deflationary, or inflationary for asset prices in particular. On its own, QE doesn’t result in more money in peoples’ pockets chasing more goods, or higher commodity prices.

A

Back in 2008 and 2009, there was a lot of base money creation, but not a big fiscal transmission mechanism to transfer it to the broad money supply. The fiscal deficit basically just balanced out the major loan losses of the time, so the net result was anti-deflationary but not greatly inflationary.