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The Federal Reserve Is Deflating, Not Inflating

Written by Gary North on July 25, 2012

We hear that the FED is inflating. It did in 2011: QE2. It is deflating this year.

Take a look at this chart. It is the adjusted monetary base, which the FED can control, unlike the various Ms. We can see that the FED has cut the monetary base this year.

You can monitor this at any time. just type Federal Reserve charts into Google. My GaryNorth.com site will be the first hit.

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13 thoughts on “The Federal Reserve Is Deflating, Not Inflating

  1. Ok I am a simple person, wanta explain this. One post says inflating the other says deflating which is it?

  2. I read this and thought about it. I don't want to say Dr. North is wrong, but I must. This commentary has a bit of a problem. Indeed, all governments have a bit of a problem. The government problem is they have to pay their employees, contractors and head honchos. The government only has a few ways to do this. The government wants to pay more to their minions and exercise more power and control over the weak. The government is walking the fence between taxing people to the point of rebellion on the one side and destroying the value of the money by printing and manipulation on the other. They are forced to back the currency with their moral force. They lose their moral force when their tactics are revealed. It all comes down to who has the power and how they use their power. If you don't have power, the only thing you can do is watch the action and hope you don't get pulled into a death trap. So, let's talk about inflation. Inflation is a loss of purchasing power and can be measured in terms of what you are purchasing. Common sense relates this first to the money in your pocket. If you do all your purchases with a plastic card, then you have to relate to your checking card balance or your available line of credit.

  3. Cash in your pocket is the monetary base talked about above. The plastic relates to what the banks are doing in extending or limiting lines of credit and the jobs economy that puts money in the bank accounts. Do you get what I am saying? Fewer loans, smaller bank balances. Tight credit, smaller bank balances and lines of credit. Fewer jobs equals less pocket money. It is NOT just the FED. The FED is part of it, but the banks play a role and government policy plays a role. Employers play a role. Consumers also have a part in this. Back to the earlier comments in my post. The government and the FED may try this or that plan, but in the end, they will print more money, even if the game is over and they know they are losing. Talk of the adjusted monetary base may calm some nerves, but it is a temporary and minor blip in the big picture scheme of things. The overall trend is toward inflation and I would challenge Dr. North to explain that away, because it seems clear to me and I dare say it is clear to most people. I'd like to know where I am wrong on this. Be careful what you do with your money.

  4. "We hear the Fed is inflating…it is not deflating" – then what is it doing?

  5. I'll bet you it's Empty and if you people would vote for Dr.Ron Paul you could find out !!!

  6. inflation is an increase in money supply !
    so it would stand to reason that a decrease in the money supply would be deflation.

  7. On the top chart, draw a line under the line shown. The line should be drawn such that it connects the lows. This new line drawn will show an uptrend in the Adjusted Monetary Base.

  8. […] google_color_bg = ""; google_color_text = ""; google_color_url = ""; google_ui_features = "rc:0"; teapartyeconomist.com / By Gary North / July 25, 2012We hear that the FED is inflating. It did in 2011: QE2. It is […]

  9. The AMBSL was ~2560 at the beginning of Jan, and is now at ~2650. Seems inflationary to me. More telling is the 330% increase in the AMBSL since 2009. We have a loooonnnng way to go to get back to fiscal sanity.

  10. […] The question is this: Will the Federal Open Market Committee agree with him. So far, it hasn’t. It has been deflating this year. […]

  11. debeddebed says:

    The national debt is owed to the Federal Reserve, The federal Reserve is owned by
    International bankers. They earn interest on every bit of paper they print or write
    money on, including internet money transfers. Their objective is to enslave every
    man, woman, and child on earth. This has always been their goal. They collect perpetual
    interest on everything. They earn interest when wars are fought, purchase resources
    when they cause recession, depressions or inflation. They control the governments thus
    they control the people because the people are (in their words) stupid!.

    The solution is to nationalize the Fed then cancel all debt. Return to the people what
    has been stolen from them.

  12. Here we go with Ron Paul again. When are they going to accept he is not winning. Jeez.

    I might add, they just passed the bill in Congress to audit the fed. It won't go anywhere in the Senate I suspect but still.