Why isn’t inflation higher?

Excess reserves held at the Fed are down from their peak of about $2.8 trillion, but still close to $2 trillion, massively higher than their long-run historical average.

Inflationary pressures are modestly higher than they had been, but still in the range of roughly two percent.

The liquidity trap is gone, with 10-year rates around 3 percent and short rates at around two percent.  In fact, from these rates there is significant pressure on emerging market currencies.

Since the liquidity trap is gone, and inflation remains well under control, the liquidity trap does not seem to be the reason why inflation did not explode post-2008, following the Fed’s stabilization measures.

No one is admitting this simple reality, which is staring us in the face.