Peter Morici

Inflation is soaring, and the Federal Reserve is looking away.

It has printed trillions of dollars to save big banks from their financial crisis debauchery and to keep interest rates low to spur economic recovery, but those have not improved the lot of ordinary Americans.

Here are five things you should know:

1. Inflation Is Heating Up

The Fed target is 2 percent inflation, but since March the pace has quickened. In May, the Consumer Price Index the government uses to adjust Social Security and other benefits increased at an eye-popping 4.3 percent annual rate.

Troubles in Iraq are pushing up gas prices, and growth in China is creating huge demand for grain on global markets, increasing meat, dairy and other grocery prices.

2. The Fed Likes Inflation

Despite inflation warnings, Fed policymakers have stated they intend to keep interest rates near zero for a “considerable time” into 2015.

Most economists believe some inflation helps growth — hence the Fed target of 2 percent instead of the price stability this economist advocates. However, it has historically been inclined to appease bankers and keep interest rates low until it is too late.

Since 1950, inflation has averaged about 3 percent a year, violating the Fed’s mandate to pursue price stability.

3. Easy Money Doesn’t Create Jobs for Ordinary Americans

The causes of the financial crisis and slow growth have not been fixed. The six largest banks have an ever tighter grip on savings deposits nationally, and they don’t very well serve the smaller businesses that are the job creators. Instead, they borrow cheaply from the Fed to gamble on foreign exchange and commodities markets, and they finance pirate equity — oops, I mean “private equity” — deals that cannibalize jobs.

The Obama administration and House Republicans continue to welcome artificially inexpensive, subsidized Chinese imports that destroy manufacturing employment, and they won’t open up off-shore petroleum development to stop sending consumer dollars and jobs to the Middle East.

The jobs created are mostly near the top and bottom and too often go to immigrants eager to beat down wages, making the bite of inflation even worse. Since 2000, all of the 5.6 million jobs created have gone to new arrivals, while unemployment among American-born adults has rocketed.

The Fed printing money won’t fix those dysfunctions or stop President Obama from building a permanent Democratic majority by beefing up the U.S. Hispanic population

Peter Morici

Professor Peter Morici is a recognized expert on economic policy and international economics. He has lectured and offered executive programs at more than 100 institutions including Columbia University, the Harvard Business School and Oxford University.