![crazynutjob:
I’ve been seeing it again. The graph of the monetary base is getting passed around as evidence that hyperinflation is just around the corner. I’ve updated my graph of the monetary base less excess reserves (previous here, sources [1], [2]). Most of the money that has been created has had the sole purpose of sitting on banks’ balance sheets to make everything appear normal.
Just as wishing for a trillion dollars from a genie isn’t inflationary if all of the money is dumped in a hole in the backyard, this magical money created by the Fed isn’t inflationary as long as it sits in the giant hole in the banks’ balance sheets. In my view, accounting constraints will not allow the banks to lend this money out, and the risk of it being passed around the real economy in the near future is rather low. If they do start lending it out, you won’t have to wait for a graph update from me to know.
Hooray for debunking Chicken Littles.](http://www.tumblr.com/photo/1280/billda/138022519/1/ROdOcuy3ipo5it9tBAUgfp72)
I’ve been seeing it again. The graph of the monetary base is getting passed around as evidence that hyperinflation is just around the corner. I’ve updated my graph of the monetary base less excess reserves (previous here, sources [1], [2]). Most of the money that has been created has had the sole purpose of sitting on banks’ balance sheets to make everything appear normal.
Just as wishing for a trillion dollars from a genie isn’t inflationary if all of the money is dumped in a hole in the backyard, this magical money created by the Fed isn’t inflationary as long as it sits in the giant hole in the banks’ balance sheets. In my view, accounting constraints will not allow the banks to lend this money out, and the risk of it being passed around the real economy in the near future is rather low. If they do start lending it out, you won’t have to wait for a graph update from me to know.
Hooray for debunking Chicken Littles.
Source: crazynutjob
2 Notes/ Hide
-
billda reblogged this from crazynutjob and added:
debunking Chicken Littles.
-
whatpriceprogress liked this
-
crazynutjob posted this
