so inflation rate is low in spite of the fed printing out unprecedented money.. isn't this going to speed up the chance of a collapse? it's like building up quietly for one massive explosion.
TL;DR, the inflation has already happened "
it takes time for the market to "factor in" new money", QE is filling in the void, only if we get asset price deflation, with QE - do we get hyper inflation.
Think of it like this: when the bank loans money to someone to buy a house the bank creates the money through Fractional Reserve Banking (RFB), (adds numbers to a spreadsheet according to a formula) the
reserve part is traditionally 1 and the numbers in the spreadsheet is x 10.
The
reserve part, for arguments sake, can come from the FED at their lending rate if the bank doesn't have the deposits on hand.
If everyone gets a loan there is lots of FRB Dollars available to buy houses, the law of supply and demand dictates the price should increase to stabilise demand. So housing prises increase - this makes the CPI look bad so they don't factor it in there.
The rising housing price needs 2 incomes, and the amount that can be borrowed increases and the cost increases to stabilise demand.
Then the Banks start selling Mortgage Backed Securities (MBS), and they call it an asset, and use it to substitute for the
reserve needed to make the FRB loan.
Then a small hiccup happens and the housing price stabilises, and all of a sudden the house of cards could collapse.
So the FED decided to purchase all the MBS so the banks will have a Dollar Reserve as opposed to a Debt, they call it QE. we carry on as usual.
Innovation and progress hide the true cost of inflation, our economy is designed to produce More of the same, -as opposed to - Better satisfy need. So the true economic collapse will be environmental in nature. A free market empowered with something like Bitcoin gets entrepreneurs thinking how to satisfy need better and can avert total collapse.
