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<p>[QUOTE=&quot;Cloudsweeper99, post: 1546014, member: 3011&quot;]The reason why you are wrong is that the transaction involves buying an asset from a bank and replacing it will dollars.&nbsp; So you are correct that no money is removed from the finance system, but neither is is added when the total balance sheet is viewed, so the claim of inflation is problematical.&nbsp; Whether or not banks lend more as a result remains to be seen, but clearly the Fed hopes this happens.&nbsp; This is why I say the chance of having deflation or inflation is 50/50.&nbsp; Your mistake is in only looking at what the Fed is doing with its balance sheet, and not looking at the other side of the transaction.&nbsp; If the Fed buys $1 worth of mortage backed securities from a bank, the bank might turn around and use the dollar to buy a dollar worth of treasury bills.&nbsp; There is more liquidity in the system, but that might not matter if the bank is more concerned with solvency.[/QUOTE]</p><p><br /></p>

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