It sorts of make sense. The big mystery was how we created so little inflation with previous QE. In fact we probably did, but because it was injected in the financial system, it created an inflation of financial assets.
But the minute the government distributes this newly printed money directly to the general public (through covid subsidies), inflation in ordinary goods follows.
I know the Fed pretends it doesn’t finance directly the budget deficit but in practice it does, and the amount of QE pretty much tracks the deficits during covid.
But the minute the government distributes this newly printed money directly to the general public (through covid subsidies), inflation in ordinary goods follows.
I know the Fed pretends it doesn’t finance directly the budget deficit but in practice it does, and the amount of QE pretty much tracks the deficits during covid.