This is not deflation... anymore than it was not record home ownership, record equity prices...all of which were artificial, nominal, and not based on reality... Deflation would imply a contraction of money supply....money supply is expanding at a record rate, despite money velocity collapsing...the Dollars being hoarded by Member banks is only a temporary, artificial situation. It cannot and will not last. Inflation remains fully intact - the damage is done. When the Dollars are released into supply, and they certainly will be, you will see what I mean...
I have come to the same conclusion except how would the money get released off the balance sheet if they are just using it for more writedowns in the future? I am assuming that they will use it that way.
I disagree: a) credit is being destroyed faster than created b) you can't force banks to lend or people to borrow. You went from a time when someone with no job no income no assets could get $300k+ loans to rational lending. Its deflation, everywhere you look all signs confirm it. Central banks have lost control. At this point, they're saving the banks (recapitalizing them) and letting everyone else burn. Lets see what happens when we get to zero interest rate policy (ZIRP)
If nothing else, they could print 100 dollar bills all night and day. Bring back the thousand dollar bill, even. Then offer stacks of em for outstanding treasury N&Bs and pay down the debt.
The resident ET "hyperinflation" fools naively assume that the FED will do nothing to "sterilize" these injections into the system.
My understanding of the classic definition of deflation means a contraction of both money supply and credit. We're not at that point (yet) if that's correct.
The way I understand it, the Fed can't print money until after the Treasury has printed more treasury notes/bonds. If anything, your solution is nothing more than a swap of current liabilities for future liabilities, plus interest. Nothing's fixed, only deferred. Help me out if I've missed anything.