The Fed is printing money. Or perhaps more properly, monetizing debt, both public and private, but not efficiently or effectively from the perspective of the broader economy. That money, sometimes euphemistically called liquidity, is flowing directly into the financial system through the Banks as a matter of public policy.
It is not unlike sending aid to a third world country, where it is seized by small groups of powerful warlords for their own use and purposes, with them deciding how much will reach the people.
It is not even sophisticated math. Look at the first chart. It is simple arithmetic.
Granted, the printing is not yet showing up as a pure monetary inflation, but primarily as asset bubbles in financial paper and selective items subject to secular monopoly market and speculative pressure: certain categories of consumer good, medicine, health care, financial fees, perks and bonuses, high end housing and collectibles, and political contributions by large organizations and the one percent for example.
That is because of the 'trickle down' approach of money distribution which the Fed, and the their partners in the government, are pursuing. It manifests in the declining velocity of money, slack aggregate demand, and the stagnant median wage. It has some of the appearance of financial feudalism in which capital substitutes for land.
The games being played in the markets are apparent, heavy-handed, and beneath contempt, operating under the rationale of a 'necessary perception management.' Necessary for whom? It is officially sanctioned theft, pure and simple, however one wishes to rationalize it. The 'new normal' is really the new awful, with a decidedly oligarchic taint.
Please be aware that all the two line charts below are using two scales, one on the left for monetary base and one on the right for the other. The purpose here was to show how the monetary base compares in change, even if the change is not linear, or one for one.
The Fed will not stop expanding its monetary base anytime soon. The economy is on life support.
They can monetize all the private and public debt that they can, but it will not have a positive effect until that money reaches the real economy. For now it is flowing heavily to support a corrupt financial system that has not been reformed, to sustain speculation, and to further enrich those who made outsized gains during the credit bubble.
The government is as culpable and more than the Fed in this. This applies to the Congress, the Administration, and the regulators.
Related: Money Supply: A Primer
There are a number of ways to repair the damage to the real economy and get it growing again. One way NOT to do it is to look at the landscape through the eyes of the trader or the speculator, and those who serve the financial interests. For the most part they are self-absorbed and blinded by their predatory instincts.They are not creators of real wealth. And they tend to distort the vital avenues of economic activity and discourse.
Charles Ferguson, Larry Summers and the Subversion of Economics
The ascent to power of the financiers, facilitated by the Clintons in the 1990's, is at the root of the problems of the day. But to be fair, the last three Presidents and the Congress are all a disgrace. And I see little hope on the horizon except for a few points of isolated light amidst a general erosion of stewardship.
My concern is that as the situation becomes worse, the elite will tend to punish the innocent and the weak. This has been their response so far and in a broader swath of western countries than one might have otherwise imagined. It may get so bad, so out of hand, that I can even imagine calls for a 'financial war crimes' trial some day, or worse. Probably worse, since these fellows are shameless, abusers of oaths, and masters of deceit.
So this will probably not end well. But it will end.