Generating credit is like

printing money in a way. Now most of the "money" flowing in the system is really in electronic form, not in the "cash" form. I agree that money supply should be viewed as a effect. But what is the cause of this annualized 22% money supply of last month? (I just use last month as an example, M3 has been high for quite a while) it is the artificially superlow short term interest rate of 1%. It is way below the annualized inflation rate of approximately 2.5%. My understanding is that such a low interest rate is only used for emergency purpose. Yet this 1% rate has been there for over a year. The result of this low rate is the further rise of already highly levered consumer debt load and fast jumping inflation.

Here are some numbers from the latest issue of Business Week regarding inflation:

Sticker shock: the checkout counter is almost as bad as the gas pump. Retail prices for many food staples have risen in the past year (from April 03 to April 04) according to Bureau of Labor Statistics data:

Price increase:
butter 23%
steak 17%
gas 10%
pork 9%
milk 9%
chicken 6%