Yes, that was during the crisis. The banks went to the discount window. That money has been paid back. How do you know banks are still borrowing from the fed? Like I said the discount window is higher than the interest the fed is paying on reserves.
I know the fed doesn’t directly buy from the government, but the fed can directly buy from the banks by creating money. You say the money sitting at the fed is being used to buy US bonds. Do you mean that banks buy the bonds and quickly sell them back to the fed keeping their money on reserves?
I know that lowering the fed funds rate requires some money printing, but that money is quickly taken right back out as the short term paper they are buying matures. I don’t see how it would cause anything but temporary inflation.
“Thus, the low rates doi not cause new money printing. No new moneyt printing means no inflation. No inflation means they get richer and richer, which is exactly what has been happening there.”
This is what i was addressing. Looking at my post, I think i was asking if the cpi, which showed low and negative inflation in the time after the crisis, means that the banks are getting rich?But I’m not sure if you meant cpi inflation, or shadow stats inflation.But basically the banks are making atleast 4% on loans and paying .07% (because of the fed) on savings accounts. This is how they are getting rich right?
I will have to check out that kel kelly article. I knew GDP was a joke but not to that extent.
Yes, I know all about quantative easing. That is not the same thing as simply lowering the fed funds rate. The fed funds rate has been lowered many times in the past and it usually does cause some sort of boom and bust, but large permanent inflation does not insue. I think QE of his scale is a whole new ball game and will lead to massive massive inflation.
Guess I wasn’t being clear. That whole paragraph is about Japan. The “they” who I said get richer and richer are the Japanese people as a whole. Because a healthy economy that produces and produces, while not getting the purchasing power reduced by money being printed, means everyone gets richer.
I am incredibly impressed with Kel Kelly. Two blockbuster articles, original and surprising and built on solid AE.
I don’t think it’s an economic q, but a political one.
Hyperinflation depends on how much money printing will happen. Obama has announced he intends to have trillion dollar deficits every year. Nobody is trying to stop him, as we saw with the farce about budget cuts. Which I am guessing means no matter who is prez in 2012, that kind of spending will continue.
Since everyone else seems to have stopped lending the govt money, both at home and abroad, the Fed will have to pick up the slack, as it has already started doing. Which seems to inexorably point to high inflation coming soon.
I’ve heard people say that at the very last minute someone in govt will wake up and save us. Maybe.