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A comment on Federal Reserve lent $300B in emergency funds to banks in the past week. Parent comment

Re:Federal Reserve lent $300B in emergency funds to banks in... by arcticbull on Sunday March 19, 2023 @09:39PM (#35226194)
Money in a fractional reserve system operates not on a push model but on a pull model. You do not 'push' money into the system. Money is created when loans (and corresponding obligations to repay said loan) are created. The increase in supply was driven by an increase in demand. Your model is incomplete. You'll have to work a specific example - how would the supply suddenly triple? Who would get that money? What would they do with it?

> I think you are trying to say that CPI and Inflation are the same thing.

I think you are trying to say that money supply growth is inflation, it is not. Even the rejected Austrian school would agree.

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Re:Federal Reserve lent $300B in emergency funds to banks in... by SideQuark on Sunday March 19, 2023 @10:09PM (#35226401)
We're not in a fractional reserve system. Banks can borrow arbitrarily from the fed, and routinely do so, and don't have reserve ratios. Many countries have moved to this model over the past few decades, including the US. The Fed has papers on this explaining the how and why of the newer system.
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Re:Federal Reserve lent $300B in emergency funds to banks in... by lumb63 on Sunday March 19, 2023 @10:34PM (#35226577)
The increase in money supply was absolutely not driven by an increase in demand. Supply was designed to pull along demand. Why else would it be called “stimulus”?

The supply did grow and the money went to banks, to the US government, etc. You can look at the Federal Reserve’s balance sheet and see entries for US treasury bonds, mortgage backed securities, etc. The US government then went and spent that on things, and the value of mortgage-backed securities increased which decreases the return on the investment and thus encourages banks to take on higher-risk investments. These activities drive inflation. So, no, an increase in the amount of money isn’t inflation, but a higher quantity of money supply times velocity does, by definition.

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