If FED is printing so much money to buy T-Bills, howcome M1 and inflation is not shooting up? This does not make sense
The Treasury can issue as many bonds as it wants at low interest and the Fed will just snap them up, paying with printed money. The U.S. government spends the money it gets from the proceeds of the bonds. Therefore, so long as the Fed never sells the bonds it buys this is exactly equivalent to the government printing the money it needs. So far this hasn't caused much visible inflation because of the massive blow out in asset prices. Trillions of dollars were lost, so trillions of dollars have to be printed to fill in the hole. Once that hole is filled in, then we'll see inflation like nobody's business. After all, congress will never stop spending. Japan has been doing the borrow and spend thing for a couple of decades now, and have a huge per capita debt, yet they still have low interest rates and low inflation. Of course there are differences between the Japanese and us -- the Japanese have run large trade surpluses during this time, and the Japanese people have long saved more than the Americans. It's not at all clear whether the U.S. will be able to sustain low interest rates for as long as the Japanese have.
something does not make sense the increase in the money supply is more than 3 times the fall in asset prices Yet, there is no increase in inflation not even a bit What is going on here?