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Politics : Politics for Pros- moderated
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To: LindyBill who wrote (520601)11/8/2012 6:30:03 AM
From: skinowski3 Recommendations  Read Replies (1) of 793866
 
My point is that we all thought that this amount would cause hyperinflation and it hasn't. And that nobody knows why it hasn't.
Apparently, the money being created has no "velocity". It doesn't go round and round. The Fed creates it, the government distributes it, but once spent, it just sits in the accounts of corporations and other entities, without getting spent - or invested. That's why there is no price inflation.

On the other side of the equation, we have a huge and very sophisticated banking system, capable of "hiding" an enormous amounts of debt. The Fed "lends" money to the banks so that they buy Treasuries. For as long as the banks get paid their interest, everyone is happy. Their holdings of bonds just keep growing.

How much of this can the system absorb? No way to tell, but one day we'll be "surprised".
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