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Politics : PRESIDENT GEORGE W. BUSH
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To: Wayners who wrote (768572)2/17/2009 1:13:01 PM
From: DuckTapeSunroof  Read Replies (1) of 769670
 
Private Banks also (by definition) 'create money' out of thin air under our system of Fractional Reserve Banking.

(The 10 to 1, or 30 to 1, or even 50 to 1 leverage they use or have used in their banking operations.)

And that's EXACTLY the problem right now: because their reserves have fallen below the statutory amount they are required to maintain, (or else very very close to it...), they have shuttered their lending operations.

And the AMOUNT OF MONETARY LIQUIDITY that this collapse in lending has withdrawn from the economy *vastly* exceeds EVERYTHING that the stimulus bill is trying to pump back into the economy.

That is EXACTLY WHY inflation is FALLING now... despite the apparent contradiction of large sums of money being spent by government, or created at the Fed.

The PRIVATE BANKS have withdrawn even more....
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