Graph #1: The Rate of Inflation since 1913

Graph #2: The Rate of Base Money Growth since 1918



Graph #3: Rate of Inflation, 1918-1960, #MQp

Graph #4: Base Money Growth, 1918-1960, #MQo



Graph #5: Base Money Growth (black) Overlaid on the Inflation Rate (red)

Click a Button to Lag the Base Money Graph by the Number of Years Indicated.

0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year

7 Year 8 Year 9 Year 10 Year 11 Year 12 Year



NOTE: If the buttons don't work for you, try this post instead.

If you're worried (or not) about inflation resulting from the Quantitative Easing of Base Money since the crisis, you might want to be looking at the rate of inflation:and at the rate of Base Money growth:The money numbers go back to 1918 -- the year my father was born, God rest his soul -- and the price numbers go back even farther, to 1913. The numbers for both are monthly (so there's a lot of data) but for today's graphs I'm using quarterly values and showing "percent change from year ago". Maybe that's more than you wanted to know. If not, you can click either of the above graphs to go to its FRED source page.I reduced the range of dates on both graphs so they start on 1 January 1918 and end on 1 July 1960. These dates center the Depression-era Quantitative Easing on Graph #4, and allow ten years or more before and after that QE, where cause or consequence might show up on the graph of inflation. Oh, and I erased the background and border of the Base Money graph to make it see-through. So now we can put the base-money graph on top of the Inflation graph and see the two plots together.Plus, I figured out how to use buttons tothe one graph relative to the other.You can use the buttons to look for patterns in inflation that match or don't match patterns in base money growth. The "zero year" button aligns the dates of the two graphs, 1930 atop 1930, 1940 atop 1940, and so on. The "1 year" button shows money growth lagged one year; the "2 year" button shows money growth lagged two years; and so on.The "10 year" button aligns 1930 on the base money graph (black) with 1940 on the inflation (red) graph. You can check the x-axis dates to see what the buttons do.Even before you click a button, notice that the two lines match pretty well in the early years (up to 1930). After that it's a jumble. So, click some buttons and look for pattern similarities, and have some fun with this thing.Here's what I see: When base money is lagged seven years, the three major increases in base money (1934-1946, black) align remarkably well with three inflationary peaks (1940-1953, red). With alag.As I observed yesterday , it is now just six years since quantitative easing began, in September 2008.During the Great Depression, it took seven years for the unusual pattern of base money growth to be echoed in the inflation pattern. It took seven years, in other words, for inflation to arise as a result of base money growth in the 1930s.In this post I offer one conclusion: It is still too early to say no inflation will arise from the quantitative easing of our time.