Paulie
Diamond Member
- May 19, 2007
- 40,769
- 6,382
- 1,830
Here's why it's inflationary:
The monetary base never dropped when the collapse came. The same amount of lendable money was in existence. So when the Fed utilized purchase programs that were not sterilized, which started in September of 2008 when they stopped selling treasuries from their portfolio to offset the purchases of MBS, this was considered inflationary as it now increased the amount of lendable money.
This is what the Fed does...it lowers interest rates to spur borrowing and lending, and does so by increasing the amount of lendable money.
The monetary base never dropped when the collapse came. The same amount of lendable money was in existence. So when the Fed utilized purchase programs that were not sterilized, which started in September of 2008 when they stopped selling treasuries from their portfolio to offset the purchases of MBS, this was considered inflationary as it now increased the amount of lendable money.
This is what the Fed does...it lowers interest rates to spur borrowing and lending, and does so by increasing the amount of lendable money.