Quote Originally Posted by Zippyjuan View Post
Sums what up? The monetary base is not a measure of the money supply. If that is what you want to look at, M2 is the most commonly used measure. And for all the money the Fed has tried to put out there to cause price iflation, it has to be circulating. That means people earning or borrowing and spending it. Prices rising becasue people are using more dollars to try to purchase goods. The POTENTIAL is out there due to the various Quantative Easing the Fed has done but it is not getting lent out and spent. That is known as velocity- and that is way down. It is also sometimes known as a money multiplier. If velocity picks up, prices likely will as well and as prices rise, interest rates will rise as well (that iflation portion of interest rates I mentioned earlier). The faster money moves through the system or the more often it changes hands, the greater the pressure on price inflation.


http://research.stlouisfed.org/fred2.../M2V?cid=32242
Doesn't matter. Any money the fed loans to the bank is added to the monetary base. It doesn't necessarily lead to an increase in M2, much less it's velocity.

But yes, throughout the past 20 years, the fed has kept interest rates low by lending the bands money. Hence the increase in the monetary base.