In a speech Sunday morning in Washington, Federal Reserve munchkin-in-chief Janet Yellen wondered why inflation has remained so subdued. Only an egghead with a PhD in economics could be puzzled by this, given that it takes practically unlimited quantities of fresh borrowing merely to sustain a convincing illusion of inflation, never mind create real economic growth.  The past is instructive here, for there was a time not long after World War II when every dollar of borrowing could be correlated to $1 or more of economic growth. Nowadays it takes perhaps $20-$30 of new borrowing, most of it at low interest rates but with a growing claim nonetheless on our economic future, to generate that same dollar of growth. Talk about a losing battle! Under the circumstances, Yellen should be happy that untold trillions of Fed funny money has produced any inflation at all, albeit in financial assets and real estate — i.e., the stuff of illusory wealth — not in wages.

Creating real growth in workers’ paychecks is antithetical to the Fed’s mission to begin with, for it is banksters just like themselves that the Fed governors live to serve. For the last decade or so, they have had their hands full trying to prevent the financial economy, represented chiefly by a quadrillion dollar gas-bag loosely known as the “derivatives market” — from deflating.  What is mystifying is not that inflation has not returned, but that Yellen and her economically ignorant cronies would risk triggering the implosion of a deflationary black hole by tightening rates in the absence of inflation.  Subjecting the derivatives house-of-cards to yet one more turn of the interest-rate screw could cause it to collapse literally overnight. Meanwhile, whatever statistical inflation is said to occur in the $80 trillion global goods-and-services economy, it is insignificant in comparison to even the tiniest shift in inflation/deflation in the quadrillion-dollar financial economy. It is worth pondering why a global economy that produces $80 trillion in real goods and services should require so large a financing apparatus. The answer, of course, is obvious: The main and most lucrative business of the modern world lies in creating and trading financial instruments, not producing actual goods and services. Those who make their money the former way could not have a more obedient servant than the Federal Reserve, nor a better friend than Janet Yellen.