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View Diary: Inflation deflation (5 comments)

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  •  Inflation hurts poor people (0+ / 0-)

    The wealthy own the assets and are thus protected from inflation.  The poor and those with less assets are hurt the most by inflation.

    We can see this clearly because our present monetary policy has increased the gap between the rich and the poor.

    We also have those that are the most well connected such as the corrupt Wall Street banks benefiting the most from the easy money policy of the Federal Reserve.

    •  You're not distinguishing between private (0+ / 0-)

      bank credit and sovereign credit, ie, gov created money.

      QE is pumping reserves into the banking system, reserves are inter bank payment clearing tools and do not circulate outside of banks.

      Banks do not lend out reserves, or even some fraction thereof.

      Banks create loans out of thin air, which creates deposits out of thin air.

      This too can create inflation, most particularly, asset price inflation, as we saw in the housing market and are seeing now in the stock market.

      The Bank of England has a good series on how our endogenous money system works, here's one of their videos.  There's more, plus papers.

      QE is exchanging dollar denominated reserves for dollar denominated bonds:

      +1 - 1 = 0

      This is why the predicted hyper inflation hasn't happened.

      Only Treasury spending currency/dollars into the private sector adds new net financial assets.

      And spending for public purpose when there's idle resources doesn't cause inflation:  New dollars chasing new goods does not = inflation.

      Only new money chasing already existing goods does.

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