Is Bernanke causing inflation?

Asian Times online has a commentary by Spengler predicting an economic crash this year. He blames the current problems on the Federal Reserve's monetary expansion.

This got me looking up the June 26 Federal Reserve money supply statistics release which can be found online at: http://www.federalreserve.gov/releases/H6/Current/. Indeed Spengler is correct if just the first three months of 2008 are considered, but other than that period, Bernanke has been fairly moderate in his money supply growth. Here are the statistics that I am looking at:

• Over the last twelve months, the Fed expanded money supply (M2) at a 6.3% rate,
• Over the last six months, the Fed expanded money supply at a 7.7% rate
  
• Over the last three months, the Fed epanded money supply at a 5.4% rate.
  

During this period, U.S economic growth has been very slow growing at about a 1% rate from October 2007 through March 2008. Thus we can deduce the following:

• From June through November 2007, the Fed expanded money supply at a 4.9% rate, which would cause 3.9% inflation.
  
• From December through February 2008, the Fed expanded money supply at a 7.7% rate, which would cause 6.7% inflation.
  
• From March through May 2008, the Fed expanded money supply at a 5.4% rate, which would cause 4.4% inflation.
  

Bernanke is like a driver who first puts his foot hard on the gas pedal and then hard on the brake pedal again. He is not driving well. But, except for the first three months of this year, he has only been causing about 4% inflation.

Spengler does have one recommendation for avoiding the crash that I like. He writes:

Americans need a tax cut on savings, not on consumption. Shovelling liquidity into the system has made matters worse. But a shift from consumption to savings will increase the supply of long-term capital, bringing down the cost of equity to firms and long-term interest rates, including mortgage rates. Let the middle class save in pre-tax dollars....

Former governor of Arkansas Mike Huckabee's "fair tax" proposal goes even further, and in the right direction, eliminating all taxation of income, including income on capital, and substituting for it taxation of consumption. That's good medicine, but the patient probably is too weak to take it at the moment.

I agree that Huckabee's FairTax would be good medicine because it would increase American savings in the long-run, but I disagree with Spengler's statement that the patient would be too weak to take it for it to work in the short-run. The FairTax would have some instantaneous short-run benefits. Instituting the FairTax would immediately make corporate investments more profitable and would make American goods less expensive in foreign markets and foreign goods more expensive in American markets. The FairTax is exactly the medicine that the U.S. economy desperately needs, not just for the long-term, but for the short-term as well!

Howard