Will there be inflation?

There is lots and lots of money being pumped into the financial markets at the moment. The fed is throwing money at everything that moves, the ECB is doing the same, and the Japanese central bank has been doing it for years. Traditionally when you do this, there is lot of inflation, which is what all the central banks want too, since it inflates away all our date. It's why markets go up, because there is more money available to go into them.

Now, with all the Quantatitive Easing (QE), we should be seeing inflation or at least some signs of it (the dollar is losing some value, so this is happening in a small way), but there are not many signs it is happening. I thought I would weigh in with my little prediction:

There will be no inflation until the oney supply has been increased to match the debt that has already been spent.

Allow me to elaborate: for the past decade we have been spending more money than we have. This has been possible through mortgages, credit cards, and the multitude of loans available from all the banks and building societies. The level of debt grew at a phenomenal rate (we've had debt for a long time, but it didn't grow at the recent rate), and this debt instantly became money that was spent. Here's the rub, as everyone who has ever been in debt knows: you have to pay off your loans. Ordinarily when you are in debt, you cut back on spending and put a little of your income into your loan, this would create deflation as we would all be spending a little less. With the central banks weighing in pumping in all this new money, it just fills the hole that is the previous debt load. Hence we are still seeing some deflation despite all this QE.

I am no economics professor, but my gut tells me that we will see lots more QE, and some more deflation for a while to come.