Jun
03

Incomplete Inflation

Fed purchases of Treasuries drives down rates and drives up the price of financial assets like stocks/bonds and real assets like houses. If banks are reluctant to lend, as they currently are, the money the Fed pays the banks for Treasuries isn’t lent. Thus, increased demand for goods and services by firms that would have borrowed and hired doesn’t materialize. Voila, asset price inflation, but consumer price inflation, no.

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