Vertical Inflation

"He's going vertical; so am I."
--Maverick (Top Gun)

Suppose there are only two categories of goods. Consumer goods are products what you and I consume in our everyday lives. Food, clothing, cars, appliances, computers, etc. Financial goods are vehicles for investment. Stock, bonds, and other securities, for example.

Suppose also that there are two ways to create and distribute money. One way is to print dollars and send them directly to people in boxes. The other way is to reduce the price of credit (a.k.a. interest rates) and offer cheap loans to primary lenders, such as banks.

Now, match up the category of good most likely to be the initial recipient of the newly created money. Correct, if people received newly printed cash in boxes, most of it would likely be spent on consumer goods, thereby rising prices in that category. If banks were the initial recipients of newly created credit money, then most of that money would be spend buying financial goods, thereby bidding up the prices of stocks, bonds, etc.

This is a consequence of the Cantillon Effect. Prices rise first in the vertical that is the initial recipient of newly created money.

Practically all of the trillion$ in money created by central banks over the past 30 years has been of the credit money variety. This is why the price of goods has remained relatively tame, while prices of financial assets have been going vertical.