The Multiplication of Money... John Mauldin explains why there is no inflation even with easy monetary policy & an exploding money supply... essentially all the liquidity the Fed has pumped has been pumped back into the Fed... "What this graph [above] shows, astonishingly, is that a dollar added to the monetary base now has a NEGATIVE multiplier effect. Without showing yet another chart, bank lending has fallen percentage-wise the most in 67 years. The actual amount of bank loans is falling each and every quarter, with no signs of a bottom. Consumers are reducing their debt and leverage. Bank loans are being written off at staggering rates. Over 700 banks (I think that is the figure I saw) are officially on watch by the FDIC, with more banks being closed each week. There is at least $300-400 billion in losses on commercial real estate waiting to be written down. Housing foreclosures are rising and hundreds of billions have yet to be written off... Is it any wonder that banks are having to shore up their balance sheets and make fewer loans?"... http://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2010/02/26/the-multiplication-of-money.aspx (4*)