The biggest portion of newly printed money by the Fed was used to buy US Treasuries and Mortgage-Backed Securities (MBS) from large regional banks. This propped up housing prices (Fed inflationary counter to market deflation in housing prices as much-needed debt de-leveraging was occurring).

The govt passed new banking rules requiring larger min levels for assets held in reserve. So, the big regional banks that unloaded under-performing MBS's (transferring that risk to the Fed's balance sheet) had to build up their asset reserves and reduce new loan origination.

Then the Fed offered to allow big banks to deposit money (like their reserves) at the Fed and earn a small interest rate to do so. So, most of the new dollars created by the Fed were pumped into regional banks, with much if not most of it being deposited back at the Fed.

The effect of this last Fed trick is to minimize new bank loan origination that would pump the newly minted dollars into "circulation" in the wider economy. It is the money supply in circulation that causes widespread inflation when it outpaces any growth in demand for the currency.

Many of those big regional banks have more money held in reserve than the min reqts. If they start originating more loans (especially if the economy shows any signs of rising out of its govt-created zombie state), there will be a large infusion of new dollars into circulation.

That will be the point when 1970s inflation is back. The Fed's clever tricks have only been delay tactics. In their hubris, they believe they can micromanage a large economy and avoid a necessarily large market contraction due to massive debt-deleveraging and bankruptcies.

The Fed's policies prop up the financially irresponsible (big spenders in debt up to their eyeballs) by punishing those who are responsible -- suppressed interest rates hurting savers, big time inflation (after the initial delay) hurting investors as well as seniors on fixed incomes.

They are also creating another big bubble (Fed's balance sheet) in addition to other big bubbles (national debt, US treasury prices). In their hubris, the Fed says they can unwind their balance sheet when the time comes.

However, the Fed cannot quickly sell those assets on their balance sheet without putting large destabilizing deflationary pressure on US treasury prices and housing prices. At that point, will they intentionally pop those bubbles or just accept a period of high inflation that further devalues the currency and the buying power of American wealth relative to the rest of the world. They will do the latter.

This picture is worsened in that these Fed delay tactics will not be able to stop the eventual rise in interest rates as inflation becomes more obvious. As the national debt has to be continually refinanced with new debt (a big portion is short term debt), the US will have rapidly rising interest payments that could become the biggest spending category of the annual federal budget.

As all of the above macroeconomic trends take hold, more foreign investors and countries will start to see us as the next Greece and will be less inclined to purchase dollar-denominated assets and investments. This creates further upward pressure on interest rates.

If at any point, the US dollar starts to significantly lose its status as the world's primary reserve currency, the above scenario accelerates noticeably.

Right now we are in the relative "calm before the storm," but delay tactics by the Fed are not indefinite. While I hope I am wrong, I see the Fed monetary policies and Washington's fiscal policies of financial irresponsibility setting us up for a major collapse in the value of the US dollar and a Great Depression II that is worse than the 1st...

Maybe we should suggest to Scott deSapio to get a gold selling company as an advertiser for the Gulch. I guess I just did.

I know FDR confiscated Au, so I do have my exit plans in place.

Countries teaming up to devalue the dollar is a far more likely effective strategy than nuclear war. While I am not sure that it will work, given the timidity of this administration at going after enemies and the arrogance of Putin, all that the Russians have to do is start the panic, and because our economy is a house of cards, a relatively small disturbance is all that will be necessary to cause the collapse. This would be a far more likely strategy for bringing about the end of the era of looters in today's era.

That is why I bought a considerable amount of Au.

70's inflation is coming. The economic charade is ending.
A year ago, I was spending about $75/wk for food.
Now it's about $100. I'm a pretty consistent shopper.
The Quantitative Easing did not have the effect Liberal Intellectuals thought it would, and they continued it far too long. We are out of money. I feel for the next President because they will have an economic crisis, and no tools at their disposal to try to fix it, or ease the blow.
Now, add a Middle East that is about to explode. China and Russia pushing Obama around really. Iran, North Korea. If the US economy collapses, Europe will follow. Who will prop up the US economy. I guess you could say, China has already been doing that.
China has been pushing to have their Yuan recognized as an international trade currency for awhile.
If the US dollars goes south, and china backs their Yuan with gold - what do you think will become of us?

The only logical explanation I can come up with for the lack of apparent inflation (excluding the obvious ratio of newly minted dollars to GDP) is that all other currencies are having similar inflation, but this doesn't satisfy me.

It could be a lot less than that even. Collapse is inevitable, but the time frame for such a prediction is difficult.

I expected Carter-like inflation.

I said 15 years to give myself a little wiggle room.

The apparent lack of inflation is a mirage. Real inflation is what they report + the ratio of the amount of newly minted dollars divided by GDP. The second component is around 7%.

Our own government is devaluing the dollar so fast that outside interests need only wait a bit.

In the early 1980's, the Middle East was willing to let prices drop from $40-50 per barrel down to $8 per barrel to drive the US producers into bankruptcy so that they could then boost prices even higher than $50 per barrel. I expect both the Euro and the dollar to crater within the next 15 years. In fact, George Soros is actively trying to make it happen.