Yay for Inflation!

On Wednesday, the Federal Reserve announced that they’d be putting an additional trillion dollars into their vault.

http://www.pbs.org/newshour/bb/business/jan-june09/fed_03-18.html

To put things in perspective, there is about $800 billion in circulation around the country. There is another $800 billion already sitting in the vault, for a total monetary supply of approximately $1.6 trillion.

When congress voted to give banks the bailout money, most of the banks used the money to offset their losses on their balance sheets – instead of giving out loans (that’s what happens when you keep throwing money at problems with no strings attached). Banks have become very stingy with their loans right now so most of the bailout money is sitting in the Federal Reserve earning interest (for the banks), instead.

Now, when the economy inevitably starts to pick up, banks will start giving out loans, draining the Federal Reserve, and suddenly tons of money will be chasing the same amount of goods.

That $13 tax break Obama gave to the poor and middle class should go far when we see the double-digit inflation that ensues.