Where has that inflation gone?

Dissecting Leftism
By John J. Ray, Ph.D.

Something of a puzzle to many commentators is that Obama's vast money printing binge has not produced rapid inflation. A greenback buys less than it used to -- particularly overseas -- but not spectacularly less.

Jerry Bowyer wisely remarks that it often takes a long time for an influence to work its way through the system and he is undoubtedly right so that is clearly part of the story.

But I think the major factor is a straightforward example of what economists call the "velocity of circulation" effect. Price inflation is a product of the amount of money on issue multiplied by its velocity of circulation and the velocity of circulation has fallen precipitously just as the money supply has increased -- the one influence largely cancelling out the other.
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