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<p>[QUOTE=&quot;fatima, post: 1380634, member: 22143&quot;]Bankers don&#039;t fear inflation.&nbsp; They desire it.&nbsp;&nbsp; They have to keep inflation going because without monetary expansion, they get into trouble with interest and banks start to fail.&nbsp;&nbsp; The Fed can only expand the money supply by increasing borrowing by the public&nbsp;&nbsp; (public = anything not government).&nbsp;&nbsp; In order to increase public lending the Fed. drops rates.&nbsp; Traditionally this means people borrow more and the resulting effect of this money entering the economy is that economy expands.&nbsp; The fundamental problem the Fed has is their bullets are used up.&nbsp; Rates are now 0% and thus they have no direct way to continue to expand the money supply.&nbsp;&nbsp; i.e.&nbsp; You can make loans cheap, but this doesn&#039;t mean that people will take them.&nbsp; </p><p><br /></p><p>What the Fed does fear is deflation.&nbsp; Deflation is destructive to the banking system as it removes currency from the money supply and hence banks can&#039;t make money.&nbsp; The problem is magnified by the reversal of fractional reserve banking.&nbsp;&nbsp; They will do everything they can to stop it including sabotaging other parts of the economy.&nbsp;&nbsp; Japan invented QE because of this issue and the Fed adopted it after 2008.&nbsp; &nbsp; QE means the Fed borrows money from itself, and then it uses the proceeds to purchase real assets in the economy.&nbsp; Hence it can expand the money supply without the public borrowing more.&nbsp;&nbsp; This is why the stock market goes up and why banks are able to unload toxic assets.&nbsp; </p><p><br /></p><p>The end result of all these shenanigans is that we have simultaneous deflation and inflation in the USA.&nbsp;&nbsp; Unfortunately it&#039;s of the worst sort and of the same type that existed in Japan.&nbsp; The deflation is occurring in real assets like housing, property, business infrastructure, and rising in commodities that people consume.[/QUOTE]</p><p><br /></p>

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