"In the last week there have been a raft of statistics showing that the US economy is weakening. The implications for other western economies are hardly bullish. They also strengthen arguments in favour of more reflation for fear of something worse. This is despite further increases in the US monetary base to a record $2.5 trillion. It is easy to forget that less than three years ago, when the economy was surfing on a fading credit bubble, the monetary base stood at a record $820 billion, so it has increased by over 300% since then. Compare this with the 44% rise over the preceding seven years. With such a substantial debasement of money it must be worrying to the authorities that there has been little discernible economic benefit.
The simple reason is that the banks have increased their reserves at the Fed, rather than lending them out to the private sector. This is reflected in non-borrowed reserves, which have increased from virtually nothing to nearly $2.5 trillion. It is because the money is sitting in the Fed that price inflation is not yet totally out of control, but inflation has the potential to become a very serious problem"......LINK
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