This is not what is supposed to happen. If you inflate the Fed balance sheet with QE you are supposed to induce inflation in the economy. Where is it? The gold market is saying there are no inflation fears. Commodity markets in general are also saying there are no inflation fears. The tepid growth and output gap says there is no fear of inflation. Asset markets are the only thing inflating.
So what is a central banker to do? Should there be more QE? One school of thought. would argue that QE has not done enough so we need to continue the program. Perhaps the alternative is relevant. The QE program is not working and we have to try something else to get more growth. Perhaps pro-growth strategies on the fiscal side of the equation?
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