|
Post by unlawflcombatnt on May 26, 2014 12:12:12 GMT -6
from moneynews.com www.moneynews.com/Personal-Finance/Plosser-excess-reserves-inflation/2014/05/22/id/572849/?ns_mail_uid=80659729&ns_mail_job=1570410_05262014&promo_code=awagrrabFed's Charles Plosser: Excess Reserves Could Spark InflationThur, May 22, 2014 by Dan Weil "Banks have $2.5 trillion in excess reserves, and that money could push inflation dramatically higher if banks suddenly lend it en masse, says Philadelphia Federal Reserve Bank President Charles Plosser, a leading hawk among Fed policy makers. The excess reserves were created by the central bank's quantitative easing, and much of it is deposited at the Fed. "These reserves are not inflationary right now," Plosser told reporters Tuesday, MarketWatch reports. But if borrowing heats up, and the reserves suddenly get put to work, watch out, he said. "That’s going to put pressure on inflation." Consumer prices rose 2% in the year through April. The Fed's difficult task is to withdraw the huge reserve surplus without hurting the economy. "One thing I worry about is that if we are late, in this environment, with all these excess reserves, the consequences might be . . . more dramatic than in previous times," Plosser said. "If you study the Fed over the years, over its history, it's always behind the curve.""
|
|
|
Post by jeffolie on May 26, 2014 15:48:40 GMT -6
If anything, the broke consumer suffers and spends less retail dollars. Retail demand remains propped up by subprime car loans which will end badly some time in the next downturn.
Who will demand more loans ... for now the primary demand remains students extending their college degrees into masters and doctorates because of poor job prospects for mere bachelors degrees.
The locked up reserves sitting in the Primary Dealers appears unlikely to spark demand pull inflation without retailing sector demand.
|
|