How do you "sterilize" the shoddy collateral the Fed took in exchange for these "injections?" Does the Fed privatize the loss to the banks that own it, or does the taxpayer take it on the chin?
the household, corporate and government sector are loaded with debt. public policy is supposed to be aimed to benefit the most people, thats why we will get public inflation policy
You obviously do not understand the word "sterilization" in monetary terms. It has nothing to do with the quality of collateral. It is a term that means that whatever injections of liquidity that have been made into the system by the FED, will be reversed . . . in order to take out the inflation risk. But most ET resident "hyperinflationists" are only able to think in one dimension. They live in a ridiculous vacuum.
Bullshit. Inflation exists for one reason; we have a debt-based monetary system. You need to inflate the money supply in order to pay back the principle plus interest. Deflation scares the crap out of the wealthy because they've leveraged their current wealth to accumulate more wealth.
Right, but they had huge amounts of savings.... plus their debt was majority held by its own citizens not by foreigners...
Completely agree with your take on the hyperinflationists paranoia. But, that's a separate issue from what the Fed has done recently with the types of assets that they've taken on in order to inject money into the system. Many of these assets that they now own have a decreasing probability of ever showing a return. It started with the BSC bailout and has gotten worse since. Again, how does the Fed "sterilize" the eventually disparity that will exist when the value of that collateral drops to zero?
thats true. but the fed doesn't have laser like precision so in order avoid the deflation spiral it will have to err on the side of inflation. they lagged to start cutting a lot and they will lag to raise a lot as well. they will lag to pull all that liquidity out as well. milton friedman would agree with all of this as he did during the 2000-2004 cycle
Not true. (I posted this on another thread as well -- why do so many people think this is the case?) The latest figures show that 75% of the national debt is owned by domestic entities with the Fed itself on the hook for 52%. Only 25% is foreign owned and that breaks down as; Japan 21%, China 19%, UK 11%, OPEC nations 6%. Russia checks in at less than 3%. http://en.wikipedia.org/wiki/United...mated_ownership
This is incorrect, broad money supply measures are being wiped out ~3x faster than narrow money supply measures. There is zero question that purchasing ability is fleeing the system at an astounding rate.
That doesn't work when you run massive weekly Treasury auctions that *require* foreign participation to keep the federal gov't solvent.