One principal conundrum of the extreme monetary policies of the last eight years is on the subject of consumer price inflation.  Expansion of the money supply is, by definition, inflation.  Yet how come, following a quadrupling of the monetary base, consumer prices are flat?

The last we checked the CPI weighed in at just 0.2 percent in March.  This certainly doesn’t seem like the great currency devaluation is under weigh.  In fact, the dollar index is up 20 percent over the last year.

Obviously, there’s been massive asset price inflation.  Since the market bottom on March 9, 2009, the S&P 500 is up over 217 percent.  In other words, the market price of the primary index costs more than triple what it did just 6-years ago.

Similarly, treasury yields stumble along at historic lows.  The 10 year note’s yielding just 2 percent.  The risk premium for dollar based government debt’s practically nonexistent.

Anecdotally, certain prices are off the charts.  College tuition’s become a disgraceful rip off.  Hotel rooms in San Francisco are very steep. Continue reading →