Other than that Mrs. Lincoln, how was the play?

In one of the most bizarre openings of a news article I have seen in a long time, the AP reported today on wholesale prices for February. Here is the opening:

"Wholesale prices jumped last month by the most in nearly two years due to higher energy costs and the steepest rise in food prices in 36 years. Excluding those volatile categories, inflation was tame."

Tame? TAME???? What kind of nonsense is this? Food prices were up by the most in 36 years. Don't they eat at the AP? Energy prices were also soaring in February. Don't they drive at the AP?

How far does the AP feel it has to go to stay within the preferred narrative that the economy is growing, we are in a full swing recovery, and prices are under control despite the Federal Reserve pumping trillions of dollars into the money supply?

Well accepted economic theory says that if the money supply grows too quickly, inflation will follow. Even if the money supply is pumped up while the economy is in recession, inflation will follow once what is called the "velocity" of money moves back towards normal. In other words, if the Federal Reserve prints an extra trillion or so dollars and uses the funds to buy government bonds, it will cause inflation. The inflation will hit either right away or once things start getting back to normal in the economy. There is simply too much money in the economy chasing too few goods. And guess what -- that is exactly what is happening.

I certainly hope that this economic theory does not work in this case. After all, the Fed did not just pump up the money supply more quickly than normal, the Fed more than doubled the money supply in about a year! That means that there should be massive inflation of a sort never seen before in this country. The Fed needs to start sucking the excess funds out of the system now. NOW!!!!!! If the Fed waits to act until there is steady 5-8% inflation, it will just be too late to stop us from hitting much higher levels. These things do not adjust in a minute or too. It takes months or years to reverse the process.

There is a real price to pay for the fiscal excesses of the Obama Administration coupled with the over-reaching by the Federal Reserve. Actions have consequences and those who forget this (or worse ignore this) cause great damage.