Money and Banks

When governments and central banks announce massive stimulus packages at the very beginning of a crisis, they bet on a speedy recovery and a return to normal as if nothing had happened. This is far from the case.

The Fed's portfolio is now 35 percent larger from the time the Fed promised to "taper" back its portfolio and "normalize." It is increasingly clear that there will not be any normalization. Ever.

It is tempting to assume both money supply inflation and price inflation will come soon as the central banks pump new money. But if banks aren't lending because the economy is in disarray, the money supply may actually shrink, and prices may even fall.

Bureaucrats cannot conjure wealth from nothing. They only have what they extract from the private sector. Unfortunately, the bureaucrats are now starving the private sector of funding while making government budgets ever larger.