"they stockpiled a record volume of $2.5 trillion in excess reserves at the Federal Reserve for which they are reaping 0.25% interest – higher interest than they give their mere mortal customers." I am glad to see that others are starting to pick up on this point. In June I published the following article which looked at the same huge build up of excess reserves by the commercial banks that has far reaching consequences which I am sure were not intended but have happened anyway. http://www.talkmarkets.com/content/us-markets/fed-pushes-on-proverbial-string-but-commercial-banks-unwilling-or-unable-to-attract-borrowers?post=44496 I am still trying to find someone who will argue against my findings and this encourages me to believe that my work on the dividend discount model is correct and that we have a long way to go on the upside before the values of bonds and equities are back in equilibrium. Furthermore, it should take some considerable time before the excess reserves are put to work where they should be and that is in the economy. In view of this long bond yields should remain low for at least until the end of the decade and probably until well beyond. Regards Tony Hayes CFA 905 468 0130

According to the late Milton Friedman - "Inflation is always and everywhere a monetary phenomenon." This time around it is just taking a great deal longer for the expansion of the monetary base to make its way into the economy at large and to show up in the what is generally thought of as inflation WPI, PPI, CPI etc. It is coming but it may take a good few years for the AWMB to grow to match the reported monetary base.