why BBY income (but not necessarily margins) will go up if you hold on long enough...
The Fed is operating as if inflation is extremely low, which is a policy mistake. For a decade prior to the housing bubble of 2008, the Fed denied the existence of "irrational exhuberence" in home values, even as evidence piled up to the contrary. That error caused the Fed to hold interest rates too low for too long, blowing more air into the bubble and imposing enormous negative consequences on the economy. The Fed is showing the same ambivalence to the inflation threat, only this time the consequences will be worse.
Apart from the statistical problems that hide inflation, there are macroeconomic factors that help keep prices down despite this quantitative easing. Massive U.S. trade deficits and foreign central bank dollar accumulation mean that much of the printed money winds up in foreign bank vaults, not with U.S. consumers, borrowers, and businesses. As foreign consumer goods flow in, and dollars flow out, a lid is kept on domestic prices. In effect, our inflation is exported as foreign central banks monetize our deficits and recycle their surpluses into U.S. Treasuries. The demand has pushed down bond yields, allowing the U.S. government to borrow inexpensively. When the inevitable flow reverses, bond prices will fall, yields will climb, and a wave of dollars will wash up on American shores, drowning us in a sea of inflation.
Krugman and the Keynesians argue that it is possible to create something from nothing. Which is the opposite of what classical economic theory and history shows us. Printing a dollar diminishes the value of all existing dollars by an aggregate amount equal to the purchasing power of the new dollar. Keynesians and the lib economic press (see Krugman) takes the position that the new money creates tangible economic growth and that real economic value can be created by putting zeroes onto a piece of paper. Since the only proof on this theory is the reverse case (see massive inflation of every central bank of the last 100 years that thought they were immune to this), those making such claims should bear the burden of proof.
reprinted with some editing from an article by Peter Schiff