One of the simplest explanations for inflation is too much money chasing too few goods. As Milton Friedman put it, “inflation is always and everywhere a monetary phenomenon.”

With this being the case, the Federal Reserve’s recent decision to begin another round of quantitative easing makes zero sense, considering that inflation is still above the Federal Reserve’s annual target of 2 percent.

While the Fed’s rate cut received all the headlines, the real story is that the central bank is going to expand its balance sheet again by buying huge amounts of Treasury bills.

Specifically, the Fed announced it will launch “reserve management purchases” of about $40 billion per month “on an ongoing basis.” In other words, the Fed is going to aid and abet the federal government’s deficit spending by “printing” about 40 billion of new money on a monthly basis for the foreseeable future.

Laughably, the Federal Reserve defended the decision to pump more money into the economy on the grounds that its reserve balances had declined to “ample levels.”

Let’s take a look at the Federal Reserve’s balance sheet........

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