Bernanke on Excess Reserves and Broad Money Measures

posted by Nima

July 25, 2009 · Posted in Monetary Economics 

I agree (believe it of not) with a few statements that Bernanke made in the recent hearing.

In this statement I agree that the Fed has made available lots of reserves, but the banks are not loaning those out:

And in this one I agree with the fact that, even though base money supply has exploded, broader money measures are not necessarily growing rapidly:

Ron Paul is very adamant about the issue of inflation. But what he is talking about is monetary inflation, not total inflation. In doing so he is missing the point. The problem with the current Fed policies is not that they will be sparking another inflation. The problem is that they slow down and prolong the current correctional period, the deflation that is going on right now.

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