More On The Krugman Inflation Spiel

In my earlier post where I argued that Paul Krugman appear to be conditioning his readers for a possible reversal in his ‘deflation’ stance, I forgot to put on some charts which Mr. Krugman has referred to.

I would like to reiterate, “Such shell game is happening NOW!”

Krugman says,

So we’re talking about a monetary base that rises 12 percent a month, or about 400 percent a year.

Does this mean 400 percent inflation? No, it means more — because people would find ways to avoid holding green pieces of paper, raising prices still further.

Let’s do away with the %. Here is the state of the adjusted Monetary Base...

…which apparently is in a VERTICAL spike! (chart from St. Louis Federal Reserve)

Here is the composition of the Fed’s balance sheets...

This from the Wall Street Journal Blog, (bold highlights mine)

Assets on the Fed’s balance sheet expanded to around $2.566 trillion in the latest week from $2.403 trillion at the end of 2010. Nearly all the additions this year have come from new Treasury purchases — some $164 billion in the past three months. The Fed announced earlier last year that it will purchase an additional $600 billion of Treasurys through June in addition to previously announced purchases with money reinvested from its MBS portfolio.

Though the overall size of the balance sheet is continuing to increase, the makeup is moving back toward the long-term trend. The MBS and agency debt holdings have steadily declined as loans are paid off or mature. The Fed still holds nearly $1 trillion in MBS, but now owns more Treasurys — over $1.28 trillion.

And here is the Wall Street Journal on what’s driving inflation expectations.... (bold highlights mine)

Inflation, once believed dead, is showing a pulse. While price increases are unlikely to become rampant, consumers are lifting their inflation expectations, and more businesses are marking up their selling prices to recoup input costs.

Signs of life for inflation come at a time when the Federal Reserve has to weigh the potential impacts from the Japan tragedy and Middle East unrest.

To be sure, Thursday’s data on the consumer price index showed inflation remains well within the Fed’s preferred target of about 2%. Total prices, pushed up by higher food and energy, increased 2.1% over the year ended in February, while core inflation — which ignores food and fuel — was up a milder 1.1%.

Even so, higher commodity costs are starting to influence the outlook.

As earlier pointed out,

True, food prices signify a minor component in the household expenditure pie for developed economies. But that doesn’t mean that rising oil, food and commodity prices won’t spillover to the rest of the economy. Eventually they will!

Regular readers of this blog know that we have been pounding the table on this pathology known as inflationism—since 2008

Such as this

Our point is simple; if authorities today see the continuing defenselessness of the present economic and market conditions against deflationary forces, ultimately the only way to reduce the monstrous debt levels would be to activate the nuclear option or the Zimbabwe model.

And as repeatedly argued, the Zimbabwe model doesn’t need a functioning credit system because it can bypass the commercial system and print away its liabilities by expanding government bureaucracy explicitly designed to attain such political goal.

Or this (2010) and this and this (stages of inflation-2009) or my $200 oil forecast (2009) and many more also here and here

False religion eventually get to be exposed. The Emperor has no clothes.