But this demand would evidently be short-lived, even if you manage to get a loan from a bank. And I'm dubious that people losing their jobs would go borrowing. They would rather shrink their expenses and lower their level of living.

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Excellent point.

Also: define inflation (there's monetary inflation and price inflation)

Then why in the name of Timothy Geithner do they bribe the banks to deposit the funds in the Fed rather than releasing them out into the economy

This type of activity is the result of people moving down both the risk curve and the time to maturity curve. In other words people are taking more risks with their capital, which leads to higher asset prices, which leads to people feeling like they have more money, which hopefully leads to people spending more money, thus stimulating the economy.

The current consumer price index preferred by the Fed as the most relevant, is wrong, because it excludes products essential to consumers and is a large part of the total consumption. Food and energy - that must be close to half of the consumption for many consumers.

Banks use the money that depositors have in their accounts to lend to borrowers. Banks need to keep a little bit of their own money (capital) on hand to protect their depositors in the event that they lose money on some of their loans. If banks solely used their capital to lend money then the amount they would earn would be small and not worth it for banks to lend (they need to use leverage in order for the loan to make sense to them). Banks needs both capital and money from depositors in order to lend money.

Lumpy distribution of newly created money is it.  Thats whats happening, those closest to the FED are the ones who benefit most.   The people to suffer most arent even in USA, they use dollars as their national currency and they dont even receive them till its grubby and used ten times already.  By then the money they get is worth far less then the FED bought its bonds with.  
Hate to say it but its kinda similar to Mugabe paying out his war pensions, the new money worked fine but if you were far down the line in the economic chain the cash worth was far less then half in that case


Cash is a promissory note.   It is a promise to deliver in future some worth.   That is what we use for money now, we used to exchange metal and the coin itself could be melted right.  WE dont do that and maybe its clever but we do have to exchange something.
If I promise to pay you and I dont, its a failed contract.   I know people can get away with it but as an economy, this would not make sense.   A saver or some kind of capital is required behind the money exchanged.  A bill is produced and a payer is required or the note to describe the transaction is no use, so its just allowing transmission of work.
  One day I work hard till tired or ill even and I dont use up all my work in favours, I save my labour to spend another day when I need it.  I think thats roughly how it works,  I rely on the job contract to pay me and utilities who service me then rely on me to pay them,  theres a chain there and Im saving one day to spend another.  Maybe its a really tight chain, I work for the utility company!
 Or maybe its super long chain and the promise is going to Zimbabwe and they send us back diamonds or who knows but its about paying and saving really?

This is a lie.

Savings are required for investment, because currency is a representation of labor an individual has expended without yet receiving a payout from this labor.

For example, if I grow apples in my back yard and sell you the apples, you give me currency, which represents the amount of work, capital, and risk I put into growing those apples.

You can print currency without anybody working, sure. But then somebody has to work to build the capital that you're basically borrowing from him in this scenario. (The currency you just printed representing your debt to him). If the person wanted consumption immediately upon receiving your currency (i.e, he wasn't a saver) he would give it back to you in return for some service of your own, destroying the currency in the process (the currency found its way back to the issuer). In this scenario, you are now the saver, because you now have put in labor to pay off your debt to the person you originally paid, without receiving any immediate consumption in return (you just get the thing you "invested" in). I suppose you could have refused to accept your own currency, in which case I suppose one can argue there was no saving, merely the unfulfilled promise of saving, i.e, theft.

Long story short, unless somebody somewhere is willing to take on the disutility of working without an immediate consumption payoff (i.e, saving) then there can never be any investment.

Now it might SEEM like there might be capital created without savings if the fed were to right now print $100M, lend it to a bank, who lends it to a company, who uses it to finance building a better oil rig for example, but indeed the savers are those that accepted the newly printed $100M as payment for their labour. If this currency never is repaid by the issuer, then that's equivalent of the theft explained in the prior example.

This is also true, but the primary problem is that there are a lack of lenders, as shown by the fact that there's a huge shortage banks willing to offer mortgages to the average american. Businesses don't want to borrow, but consumers do and can't get it. Maybe if the consumers could get it, and the threat of a rate spike wasn't always on the horizon, businesses would be more encouraged to borrow?

"Let me guess.. You are an Anarcho-Capitalist who reads Rothbard or learned economics from Stefan Molyneux.  Roll Eyes"

I prefer that to be a mystery. The dicussion should be over my arguments (and yours).

Incorrect. There has been little or no inflation throughout QE because QE has made interest rates so low that lending doesn't make sense for financial institutions. You'll notice that in supposedly riskless environments such as the treasury market or excess reserves at the fed, there has been significant "loan growth" (if you can call it that) and inflation.

That might be true today but thats wrong in the grand scheme of things.   Saving is not waste, pure cash kept in a biscuit jar sure I guess its not wise but savings deposited with a insurance or savings company is a good thing that supports a community.  This is no longer cash then, it is investment
A country needs capital for investment, it cant always be about debt because where does the money come from to enable that debt.   At some point savings or unspent production must be directed towards investment, it cannot always be about spending every penny you've got.   But hey dont worry, the asians are obsessed with saving, its their problem

I agree about owning your own home and so on but that does require savings also, all debt is not a good idea or basis for an economy to operate on.  Leverage adds risk and timing failure possible.   In the end we see it ends up with government being forced to save consumers from themselves and because this is a democracy this has the country bending over backwards to serve people who failed to save, did not engage foresight in their actions or caution as to the consequences.

 In the end we are all poorer for not saving, for not being to access savings as a nation.  Externally this gap is being covered by foreigners but this brings danger of imbalance and compromised sovereign integrity also

MMT modern money theory. Fuck someone, I had to unnecessarily look that up. It seems to be a variant of socialism; central planning with government intervention in the free market.

The banks get the expanded money supply that is supplied by the Fed. The hope is that banks will increase lending so that more people will borrow money, stimulating the economy.

He doesn't have one. He seems to regurgitate talking points from MSNBC, and has little understanding.

Edit: wrote this whole thing from a phone. Bear with the mobile fed links.

It's kind of obvious in a sneaky way.

You see when you look up us money supply you typically get this, the monetary base:
http://m.research.stlouisfed.org/fred/series.php?sid=BASE&show=chart&range=max&units=lin

But, this is actually more important for determining inflation in the short term:
http://m.research.stlouisfed.org/fred/series.php?sid=WCURCIR&show=chart&range=max&units=lin

Check it out. Whas the difference between currency in circulation and monetary base? Monetary base also includes demand deposits in the federal reserve. Demand deposits in the fed still bear interest. But unlike a normal demand deposit, the money is not invested or relent. Instead, its effectively destroyed. Until the depositor demands it back that is.

But, how can it pay a rate then? The answer is, it doesnt, not really. That rate is effectively a bribe to banks to give the fed permission to destroy that chunk of the money supply for a while. And currently it accounts for a huge portion of the monetary base. In fact, it accounts for nearly the ENTIRETY OF QE.

To me, that's a mixed message. Why bribe banks to destroy money when supposedly the entire point of QE is as so many people like to put it, "print money", or as the feds like to call it, "stimulate the economy."

In actuality it neither , nor was likely intended to achieve, either end. We've got it wrong, at least on the surface. The real purpose of QE was to decrease real reserve ratios. I'll get to why in a second.

Here's how people think the QE story works:
Government sells bonds. Banks buy bonds. Banks resell those bonds. Fed buys bonds sending newly printed money to banks. Bank lends money, government spends money. Money was just printed.

Here's how it really works:
Government sells bonds. Banks buy bonds. Bank knows that bonds don't count as a reserve asset, and knows that interest rates will rise because the fed said they would. Bank sells bonds. Fed buys bonds. Bank DOESN'T lend the money, it deposits it right back into the fed. Why? Because like bonds, loans to business and consumers typically depreciate as rates rise. Also like bonds they don't count as reserves. Not to mention the risk. So bank deposits money into fed who then bribes the bank to keep it there with their low demand deposit interest rate.

See how that works? No money is actually created. The government can spend the money it got from banks. The banks can't because it's locked in the fed demand deposit account that serves as a reserve so they have no incentive to ever lend to anyone else, or so anything else but repeat this process as often as possible (since they get a markup when they resell the bonds).

Actually, this whole QE thing is basically a clever marketing trick. To sell what? Government debt.

By switching the bond for cash it won't lend or spend, the bank still effectively has it lent to the government. Only, instead of having to lock it in for 10 years, it's entirely liquid. Moreover, there would be no one In his right mind to buy bonds when rates are artificialy low. But the demand deposit account has a variable rate!

All's dandy till th banks demand their deposit. Naturally they can only demand a portion - laws mandate they have to have some in there - but even if a mere 1 trillion were suddenly withdrawn and lent the currency in circulation - what actually affects prices - would basically double.

Now check this out. http://www.federalreserve.gov/releases/h3/current/h3.htm

Last week, there was a net outflow for the first time I can see.

So? What happens? "We're raising rates soon! So don't lend because we're about to devalue that loan! Also we're going to bribe you more to keep your money out of the economy!"
http://m.us.wsj.com/articles/fed-officials-see-role-for-interest-on-reserves-1404929744?mobile=y

The thing is, the bigger bribes they pay the more there will eventually be to withdraw. Hmmm....

In the context of price analysis, this is simply not true. Fundamentals are subjective rather than objective developments.