As I have reported before, while there appears to be a fixation in mainstream media with Fed "tapering," the real deal is that the tapering is already going on as commercial banks continue to add to their excess reserves accounts at the Fed, thus keeping most of the high powered money, that Bernanke is printing, out of the system and thus slowing money supply growth.
The latest money supply numbers continue to reflect this.
To get today's full ALERT, where I detail the latest changes in money supply growth, subscribe here.
Paying interest on excess reserves is a good way to keep the high powered money from reaching the real economy. The Fed could eliminate this practice or even charge for the privilege of parking reserves, but then the magic of fractional reserve banking kicks in and gives us raging price inflation.
ReplyDeleteThe Fed is trapped in the same box as the BOJ. They want price inflation, but their governments can't finance the debt with even mild interest rate increases.
How do they convince millions of individuals, bond funds and foreign central banks to invest in long-term debt with negative rates of return in ever increasing amounts? And how do they unwind this mountainous balance sheet when the "recovery" takes hold without sending the economy into a long-lasting depression?
There is no way to square this circle. Can you say, "default"? I knew you could.