No, I am thinking that the banks are struggling to avoid a deflationary spiral and that the inflation, bogey man, story is a canard to misdirect the public.
The money supply has increased greatly thru direct Fed purchases of Treasuries, it's true, but because the velocity of money, (think of it as the rate of transactions) has been
so low the price level is set to fall sharply, ie deflation.
In this scenario, prices fall and therefore asset values fall and banks, whose collateral for their loans is dependant on the dollar value of the security get killed.
What needs to happen and what is going to happen is the value of everything needs to naturally go down and non stimulated supply and demand set the prices at that reduced level.
So far Goldman Sachs/Warren Buffet and others have acted to artificially support the price level, postponing the losses of the biggest banks and governments through their influence but the rate of transactions is a testament to the rejection of that price level by the market.
I don't know when but we are due for a cataclysmic correction ala Texas in the ‘80s
To clarify (in typing), there is not an economics background in this opinion. Full agreement the market place should reflect supply and demand, and realization this is not what is taking place. Full agreement deflation would be in the cards should the market place set prices. This would also be reflected in world markets.
(imho) The FED purchases have delayed the market place (main street) from reflecting actual value, therefore full agreement here also. Do you have an opinion as to why the FED is instead following the plan being followed and appears the FED has determined, through policy, to instead pursue inflation as a solution, or is your reasoning based on the FED wanting to not allow deflation? Thinking your reasoning is the FED has determined to control the market place and not allow the correction for as long as the FED can avoid the correction (aka deflation). And in your opinion, is the FED pursuing this policy based on design or incompetence? Please correct me, if I have misunderstood.