i suggest you all read this.
http://upload.wikimedia.org/wikipedia/commons/4/4a/Modern_Money_Mechanics.pdf so you know how money really works.
When you consider that all money is debt, the interest to be paid on this debt does not actually exist. The amount of money in the money supply will always be less than the total debt+interest. The only way this interest can be paid, is the by constant creation of new debt(credit) in order to service the already existing debt. (like someone withdrawing cash from there credit card in order to pay the same credit card). The other way is through bankruptcy.
When the money supply and amount of debt gets to much, the system crashes (credit crunch) and causes a recession. When the system crashes, it means no new debt is being taken on by the economy in order to service the existing debt. Hence contraction in GDP and consumer credit as money is leached from the money supply in order to service the interest on all the debt in the system (remember there is not enough money without the creation of more debt to pay this interest)
When the system crashes like this, the fed steps in and lowers the federal funds rate meaning money is cheap to borrow in order to stimulate the process of creating new credit to prop up the system. the system NEEDS this money so it doesn't completely implode. The level of money being pumped into the economy which many refer to as printing the money etc (which is a joke as all debt in the system is created out of thin air which you will know if you have any clue about the fractional reserve banking system, see the link) by the fed is a TINY amount of money compared to the levels of money created normally within the system. This is quantitative easing, the attempt to stop the system from exploding..proving emergency funds to keep the cycle going. The idea that the fed's efforts could cause hyperinflation is laughable as its entire purpose is to try (and fail) at stopping a massive bone crushing deflationary cycle. Which is actually unavoidable in the banking system UNLESS the cycle of credit creation continues.
How ever this cycle is not continuing. This recession wasn't just the housing market bubble bursting. it was the fiat currency cycle bubble bursting. (see many of George soros books) It was the end of the super cycle. Banks are not lending, people are not borrowing..this is indisputable. Banks are hording cash and not lending all the toxic **** derivatives they are hiding on there books. People are no longer borrowing, they borrowed to much..and have perhaps learnt there lesson (for now, will be soon forgotten) the record contraction in consumer credit shows this nicely.
"Consumer credit decreased at an annual rate of 4-3/4 percent in the fourth quarter of 2009. Revolving credit decreased at an annual rate
of 13 percent, and nonrevolving credit was unchanged on net." Fed
http://www.federalreserve.gov/releases/g19/Current/ (pretty easy to see for yourself what has happend in consumer credit since the recession) And dont remember a huge part of the economy is the consumer..but the consumer has no money as it isnt borrowing any? hmm interesting.
So banks arnt lending, people arnt borrowing it anyway. So what does that mean? It means no new credit, no new credit to pay the interest on the outstanding debt in the system..while the fed desperately tries to make the titanic water tight with some duck tape.
This means that the longer the cycle is broken, the more and more money is leached from the system as world de-leverages from this orgry of debt. (DEFLATION). Deflation is a dirty word in economics, hence few people talk about it. Banking, governments, economists LOVE inflation. but its all a lie. It is just not possible while the cycle is broken. You will struggle to find this sort of explanation and theory in your newspapers as it goes agasint the "machine" and is the true nightmare scenario that people don't want to admit to. "deny till you die"
I seriously suggest reading the pdf along with this post.
I hope this helps some people who have been struggling to understand. If anyone comes back and says what i have written is wrong and we are about to see hyperinflation. You are an idiot.
