“Now, what these reserves are is essentially deposits that commercial banks hold with the Fed, so sometimes you hear the Fed is printing money, that’s not really happening, the amount of cash in circulation is not changing. What’s happening is that banks are holding more and more reserves with the Fed.” (Bernanke)Be careful. The only thing the Fed is doing is trying to lower yields on some Treasury bonds, thus encouraging business to borrow and banks to lend. No more. No less
This is not inflationary. The reason commodities are rising, in my humble view, is because short-term interest rates are close to 0% encouraging carry trade transactions.
George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest
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2 comments:
Is not the declining USD is inflationary? And one of the reason of rising commodity prices. Also, slowly bond yields are rising since last 3 months which tells us inflation will rise too.
Increase bonds yields means declining bond prices which cannot be good for stocks.
You may be correct when and if it happens. We are not there yet.
See also my posts on currencies.
George
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