The Fed “drains” liquidity by selling securities in return for dollars. We have a LOT of securities to sell. If the Fed does not push those dollars back into the monetary system, it reduces the money supply. It’s the opposite of Quantitative Easing or “monetizing the debt”.
“The Fed “drains” liquidity by selling securities in return for dollars.”
Ah, so the foreign government that got dollars in exchange for its better currency would have to buy US securities with those dollars? Seems rather unlikely to me, but I guess we’ll see...
Here’s a thread discussing an article that sees massive inflation right on the horizon:
http://www.freerepublic.com/focus/f-news/2389302/posts
Enjoy!