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NEW YORK (TheStreet) -- With the Federal Reserve having pumped so much money into the banking system, why aren't we seeing more inflation?  

When the Federal Reserve started to inject so much money into the banking system in 2009 and 2010 -- about $3 trillion dollars, all told -- many economists were predicting the worst: a great recession right into a hyperinflation. Some are still worried about that.

The problem with this conclusion is that this analysis looks at only one kind of inflation, consumer price inflation, connected with the acquisition or the purchase of currently consumed goods and services.

In the 1970s and 1980s, the United States experienced relatively high rates of consumer inflation and this resulted in the Paul Volcker-led Federal Reserve battle against rapidly rising prices at that time. 

The Fed's maneuvers worked. Since the mid-1980s, consumer prices seem to be under control, so much that the period beginning in the late 1980s and going into the 1990s has been called the Great Moderation.

So, where is all the money going? Assets like real estate, equities and other financial instruments. 

Asset inflation became a factor in the early 1970s as people started buying houses to take advantage of the steady increases in home prices, started buy gold as an inflation hedge, and started buying other assets, like pictures, to take advantage of their constant appreciation of value.

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Beginning in the 1990s and continuing into the 2000s, more and more discussion arose concerning bubbles in asset prices. There was the dot-com bubble, and the housing bubbles, and the stock market bubbles and the commodity bubbles.

Of course, bubbles are very difficult to define before the bubbles pop, and no satisfactory definition has been constructed that can identify an asset bubble before it pops. But, the concern about bubbles exists and analysts are on the watch for them.

Basically, investors, particularly wealthy, sophisticated investors have had fifty years to build up their expertise in inflating asset prices. 

Returns have become so good in the financial circuit that most of the money being created by the Federal Reserve system is going into the financial circuit with much fewer funds going into the industrial circuit.

Hence, the muted reaction of the economy and consumer prices to Fed stimulus. Even though consumer price inflation dropped off by the mid-1980s, asset price inflation continued into the 1990s and beyond, fueled by the Fed and by all the financial innovation that took place. Investors have just gotten very, very good at taking advantage of rising asset prices.

Hence, the concern over consumer price deflation, even though the Federal Reserve has been so loose. Investors seem to be content, in the current environment, to put their money into assets rather than into producing goods and services.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.