"It’s the printing presses, stupid"

According to Larry Kudlow inflation is here and it's going to get worse.  He predicts that Ben Bernanke and the Fed won't stand up to the political pressure from Treasury and the White House.

'...when you talk to traders and economists, the whisper story is that Bernanke and the Fed are no longer truly independent of the Obama White House and Treasury. As a result, Bernanke will not be able to slow down the printing presses and gradually lift the near-zero target rate in a timely and effective manner. Already the Fed has created more than $1 trillion in new cash, and the M2 money supply is growing at its fastest pace in 25 years.

This monetary explosion explains what’s really driving the dollar down and Treasury rates up (alongside rising gold and oil prices). It’s not huge budget deficits, but the growing fear that a less-than-independent Fed will keep pushing new money into the financial system in order to fund Obama’s liberal spending policies.

This week, German chancellor Angela Merkel launched a broadside against the Fed, saying she views the Fed’s powers “with great skepticism.” It was an important rebuke. Here’s the elected leader of a major country actually telling a central bank to stop the printing presses and avoid creating yet another inflationary bubble during the next recovery cycle. In other words, it’s the printing presses, stupid.'

It may be instructive to note that the explosive growth in the money supply is not, at present, matched by a corresponding growth in GDP.  Since the second quarter of 2008 GDP has been in a steady decline.

                Quarterly GDP in billions
        (Seasonally adjusted annual rates)

                    current          chained 2000
                    dollars            dollars 

2008q2         14,294.5         11,727.4
2008q3         14,412.8         11,712.4
2008q4         14,200.3         11,522.1
2009q1         14,089.7         11,353.7

Dollars in circulation are going up while goods and services are going down, and I don't see anything in Obama's handling of the economy that suggests there will be GDP growth in the near future.  Putting Chrysler and GM on the dole and handing them over to his political special interests, the UAW, signals just the opposite.  As does this pretense at achieving energy independence while discouraging domestic oil exploration and production.