One of the enduring mysteries of the past decade is why inflation has remained tame while the central bank and government have pumped trillions of dollars of newly created money into the economy. Millions of words have been written about this, and so some shortcuts will have to be taken to make sense of it in one essay.

Let's start with the basics.

1. Adding newly created money but not generating new goods and services of the same value reduces the purchasing power of existing money. To keep it simple: say the economy of a country is $20 trillion. (Hey, the US GDP is $20 trillion...) Say its money supply is $10 trillion.