kylesch

Money Supply: The Myth of Hyperinflation

For the record, my previous post (shown below) was post-edited by someone at Seeking Alpha without my approval or consent.

They removed the first paragraph where I urged the author to update the article to include the correct fact that the Fed was NOT using existing Federal Funds on excess reserve to purchase assets.


On Sep 03 07:22 PM kylesch wrote:

>
>
> The Fed did not entice banks to deposit their existing cash on reserve
> at the Fed. The Fed really did print the 1 trillion+ dollars and
> then used a combination of instruments to place this out in the marketplace
> (TAF, TALF, buying commercial paper, buying treasuries, buying agency
> debt and CMBS ...).
>
> Once the Fed has given the newly printed cash to the banks in exchange
> for their assets as collateral, the banks have then taken this cash
> from the Fed and have left it on deposit as excess reserves.
>
> Remember, the Fed has been trying to *increase liquidity*. If the
> banks were simply leaving existing cash on reserve at the Fed, this
> would have decreased liquidity (removed cash from the system).<br/>
>
>
> For those interested, John Mason, a former economist at the Fed,
> has a post that touches on this very subject: maseportfolio.blogspot...
>