Here is a must-read piece at Samizdata, which looks at a seemingly novel phenomenon, namely huge boosts to the money supply in the USA but no signs of price inflation.

How can that be?

Because the state in effect is bribing banks not to lend:

So to put this thumbnail in a nutshell, the Fed has inflated the available money supply by 1 trillion dollars while simultaneously paying banks to not loan 1 trillion dollars. While there is no obvious connection between these two acts, the effect is a simple one. The FRB/Treasury is competing against the free market, effectively borrowing banks’ consumer lending funds to keep the band playing while the lower decks of the nation slip beneath the waves.

Killing loans is how they are hiding the evidence and disguising the potential hyperinflationary effect of monetizing. The Fed/Treas has to smother the private loan market or all of that new money they are creating and giving to special interests would show up in the form of doubled consumer prices.

As appears to be illustrated by a terrifying graph, which shows that something dangerous and unprecedented has happened:

The problem is not and never was ‘market failure’. It was and continues to be incorrigible government and inevitably corruptible politicians and regulators.

This economy could and would have recovered quickly from even the most recent policy created bubble, the real estate ‘boom’, had the advice and opinions of some of us (even here on Samizdata threads) been heeded.

The cause of this continually worsening crisis is the repairs the self-anointed experts are inflicting. Paralyzing the lending market, taking money out of the free economy and using it to fund government sector favorites, is like giving muscle relaxants and pain killers for an asthma attack.

Sure the stridor of economic desperation diminishes, but that momentary relief is called ‘dying’.

The Final Irony.

Capitalism/Freedom trends towards Collectivism/Serfdom because the state destroys the core feature of freedom – honest money..?