Not for some time to come…

We read a lot of panick stuff about how the large amount of money creation is supposed to lead to inflation. But with factory capacity utilization at 70.7% and unemployment at 10.2% (which doesn’t reflect real unemployment), the economy is in a depressed state, and labour in no position to ask for any pay rises.

The money that is created sits in banks, mostly. Some of it is going to financial markets, but it’s hard to argue these are very overvalued, especially when taking record low interest rates into consideration.

Speaking about these interest rates, even with all the new debt paper flodding the markets as a result of record Government deficits, even long rates have remained exceptionally subdued. This is a clear sign the markets are not worried inflation is going to rear its ugly head any time soon. Some even wonder about these rates, but they are what they are..

Fisher: Government Debt Could Push Rates Up
Monday, November 16, 2009 2:33 PM

The U.S. government’s growing indebtedness could put upward pressure on borrowing costs, Dallas Federal Reserve Bank President Richard Fisher said on Monday.

Fisher told a group of bankers and business executives that he was surprised at how low rates have remained despite what he termed a “significant” increase in debt issuance.

“Rates are lower than I would have expected them to be,” Fisher said. “We’ll see how long that continues.”

Fisher said the economic recovery would likely be slow, adding that the originally reported 3.5 percent rate of annualized gross domestic product growth for the third quarter would likely be revised lower.

“I’m willing to venture that growth was not as robust as originally reported,” Fisher told a group of executives at a Texas conference.

He added that revisions would probably bring the annualized growth rate of gross domestic product closer to 2.5 percent or a little bit above that.