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To: djsherin
"If they choose to fully loan up again (holding the legal minimum of 10% reserves) the money supply will explode, followed by prices."

Absolutely agree. The Fed could sop up that extra liquidity with interest rate increases, but they won't do much and will do so too late.

27 posted on 01/06/2009 11:33:40 AM PST by Uncle Miltie (Most Animals protect their babies. Palestinians kill their babies.)
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To: Uncle Miltie

The other elephant in the room is the debt. Putting aside its sheer size and the fact it continues to suck up money that would otherwise got to the private sector, if interest rates spike up, which will be necessary to halt (or in this case, slow down) inflation, then the amount being paid to new owners of the National Debt will go up, further increasing the debt. This isn’t going to end well for us in my opinion. Could you imagine what would happen if the US defaulted?

There’s no doubt that it will be intriguing to see this unfold as an observer, but quite frightening as a citizen.


28 posted on 01/06/2009 1:56:35 PM PST by djsherin (The federal government:: Because someone has to f*** things up!)
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