The Federal Reserve’s ‘Interest On Reserves’ Doesn’t Contain Inflation
The post The Federal Reserve’s ‘Interest On Reserves’ Doesn’t Contain Inflation appeared on BitcoinEthereumNews.com. WASHINGTON, DC – DECEMBER 13: U.S. Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the headquarters of the Federal Reserve on December 13, 2023 in Washington, DC. The Federal Reserve announced today that interest rates will remain unchanged. (Photo by Win McNamee/Getty Images) Getty Images The difference between what economists believe and what’s true is Pacific Ocean vast. Think the popular view that the Federal Reserve, by paying banks to park reserves at the central bank, is containing inflation. Where to begin? First, inflation is one thing and one thing only: a shrinkage of the exchange medium circulating such that it exchanges for fewer and fewer market goods. In our case, inflation is a shrinkage of the dollar. Except that the dollar’s exchange value isn’t, nor has it ever been, part of the Fed’s policy portfolio. What about interest on reserves? What about it? If we ignore that lending has nothing to do with inflation to begin with, what wasted thought. That’s because credit is produced, not decreed or managed by central banks. Individuals, banks, and governments borrow money not to stare lovingly at it, but for what it can be exchanged for. Which is just a comment that credit is an effect of production, nothing else. Economists ascribe an inflationary quality to borrowing which implies impressive market stupidity. Really, what individual, business or government would take on debt just to take it on? Tick tock, tick tock. The answer to the above is what is once again true: credit is produced, which means lending grows alongside production. Looking ahead, and in consideration of the extraordinary production surge that awaits as AI and other labor-saving advances render humans superhuman in terms of their ability to generate endless plenty, credit availability today will be but a tiny…
The post The Federal Reserve’s ‘Interest On Reserves’ Doesn’t Contain Inflation appeared on BitcoinEthereumNews.com.
WASHINGTON, DC – DECEMBER 13: U.S. Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the headquarters of the Federal Reserve on December 13, 2023 in Washington, DC. The Federal Reserve announced today that interest rates will remain unchanged. (Photo by Win McNamee/Getty Images) Getty Images The difference between what economists believe and what’s true is Pacific Ocean vast. Think the popular view that the Federal Reserve, by paying banks to park reserves at the central bank, is containing inflation. Where to begin? First, inflation is one thing and one thing only: a shrinkage of the exchange medium circulating such that it exchanges for fewer and fewer market goods. In our case, inflation is a shrinkage of the dollar. Except that the dollar’s exchange value isn’t, nor has it ever been, part of the Fed’s policy portfolio. What about interest on reserves? What about it? If we ignore that lending has nothing to do with inflation to begin with, what wasted thought. That’s because credit is produced, not decreed or managed by central banks. Individuals, banks, and governments borrow money not to stare lovingly at it, but for what it can be exchanged for. Which is just a comment that credit is an effect of production, nothing else. Economists ascribe an inflationary quality to borrowing which implies impressive market stupidity. Really, what individual, business or government would take on debt just to take it on? Tick tock, tick tock. The answer to the above is what is once again true: credit is produced, which means lending grows alongside production. Looking ahead, and in consideration of the extraordinary production surge that awaits as AI and other labor-saving advances render humans superhuman in terms of their ability to generate endless plenty, credit availability today will be but a tiny…
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