Saturday, June 28, 2014

More on the central banking in and out thing

Mainly to help the economists.
When the central banker lends money here is the flow:
1) The central banker earns interest and the principal is returned, a net flow from the banking market to the Fed.
2) The Fed subtracts the funds it needs to operate, and returns the rest to the central government.
3) The consumer gets disinflation, the government purchasers get inflation.
4) The net result is the recession expansion cycle which moves with presidential elections.

So inflation moves between the consumer and central government. The result is cycling, not counter cycling. In 2003, the Fed began lending less money to the market. Inflation and rates both rose. Smae thing happened with Volker.

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