Submitted by CARPE DIEM

The top chart above shows the annual percentage changes in the monthly monetary base from 2002-2008. The bottom chart shows M1 (red) and the monetary base (blue) from 2002-2008.

Clearly, the growth rate of the monetary base (”high-powered money”) has been slowing, and both M1 and the monetary base have been flat for three years.

Q: How can inflation be a problem when M1 has been flat for three years, and the growth rate of the monetary base has been declining for six years?
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