Money Supply

Quantitative easing is a euphemism for "more."

Buy now before the price goes up again.

   By making more money available, the Federal Reserve hopes to encourage people to spend more, since they have more. And if the money supply grows faster than the economy in general, the result is higher prices.
   Historically, "An acceleration of money growth in excess of real output growth has invariably produced inflation," according to Anna Schwartz, an economist at the National Bureau of Economic Research.
   One narrow measure of the money supply is called M1, the amount of currency in circulation and in checking deposits. It rose from $1.84 trillion December 2011 to $2.17 trillion in December 2012 -- just last month.
   Meanwhile, prices rise in response to a greater quantity of cash available. There is a lag, however, and experts exploit this lag as a way to jump-start a weak economy. But if the additional supply of money stops at the corporate and bank level to reinforce balance sheets, build up cash on hand, shore up stock prices and pay executive salaries and bonuses, and it does not flow on to consumers, the effort is futile.
   The economy in general does not benefit and the cash is assimilated into the executive borg-room.
   This does not necessarily mean the Fed should stop trying. The "trickle-down" theory so loved by conservatives can work if those at the top who benefit from the additional flow open their financial gates and let the new supply irrigate the economic fields.