Does Fed "Stimulus" Bolster Deflation?

The Federal Reserve initiated an unprecedented stimulus program to combat the Great Recession. The U.S. central bank's total assets swelled from just under a trillion dollars in 2008 to around $4.5 trillion today.

What's been the result? The answer is an inflation rate of only 1% in the 12 months ended February 2016.

One Fed watcher says "monetary creation by central banks have only ensured the next deflationary wave."

Read this excerpt from a March 16 article:

Central banks purchases of public and private debt titles were certainly justified as an emergency measure to backstop the imploding global credit system at the depth of the panic end 2008 – early 2009, the culmination of 35 years of consistently rising debt loads.

The mistake was to pursue these credit easing policies once the emergency had passed to make them structural and still lasting eight years later. At the Fed, Bernanke took the opportunity to demonstrate the validity of his theory expressed in his famous November 2002 speech “deflation, making sure it doesn’t happen here”. All the measures outlined in the speech have been put into practice. Most of his counterparts around the world followed. And we saw the results of this large-scale real life experiment: after a brief boost in 2010-2011 as newly created money flowed into commodities, inflation quickly fell back to 0% pretty much everywhere. No deleveraging occurred. Instead, global relative debt is higher than in 2007. The theory had been empirically tested … and proven wrong. ...

Central banks across the world are now locked in a headlong flight with no exit and in a conflictual dynamic of competitive devaluations to try to export deflationary forces they themselves exacerbated to trading partners. While several trillions of debt securities are yielding negative interest rates and exchange rates are jumping all over the place, global trade has barely grown since 2012, global PMIs have been lackluster and under-employment has barely receded from socially destabilizing levels.

You can read the entire article by following the link below: