Barnanke knows Paul is a formidable person to be dealing with. Paul pokes holes into what is being done and shows that it is all smoke and mirrors. Great job and keep at it. At least someone is looking out for the well being and stability of the USA.. so many are not.

The reasons the increased money supply has not translated into inflationary pressure at least so far is twofold:

1 - Commodity prices particularly for raw food inputs as well as energy prices all fell dramatically and reserved a rising trend when the financial crisis hit as demand dropped off. Energy prices fell predictably as firms wound down their inventories while significantly scaling back production whereas food prices as a result of consumers everywhere, particularly in lesser developed countries substituting for inferior, cheaper and less input intensive foods. If you're looking at an annualised measure of inflation this would still be factoring into the current figure.

2 - More importantly though, underutilisation of resources whether that be firms operating at under full capacity, or not utilising all available labour capacity in light of the financial crisis means that increases in the money supply don't ripple through the economy as quickly. Once the economy begins to pick up though, that will be a different story.

Didn't they change CPI like in the 70s? Isn't what they currently use to measure inflation ridiculed even in the most sympathetic circles? More over, doesn't it usually take a little while for inflationary policy to sow its evil seed? How can you double the money supply and not expect any inflation, moreso with an increase along side a recession (a down turn in production). Doesn't it just follow that with fewer goods and services in circulation having a larger amount of money chasing them would naturally cause prices to inflate?

Good comments! Inflation should be as plain as the nose on your face, but central bankers can't see it.