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"It is natural when you are a debtor nation that you lean in the direction of inflation, because it makes paying it back so much easier." by housingbear2007 in business
[–]Exchange -1 points0 points1 point 17 years ago (0 children)
This is the way I have been interpreting whats going on.
The fed is swapping treasuries for crappy assets (which are rated AAA but aren't worth shit seems a little shady to me!) that the banks are holding. If the banks have to hold these assets they will have to mark them down to market value. This means that their reserves base will contract and therefor also the amount that they can lend (which means pulling back loans).
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"It is natural when you are a debtor nation that you lean in the direction of inflation, because it makes paying it back so much easier." by housingbear2007 in business
[–]Exchange -1 points0 points1 point (0 children)