The fractional banking and inflation

I believe we have stagflation. Food going up and other things going down. Wages stagnant or falling while cost of medicine goes up. Gas price dropping but, so is the number of new drilling projects that will later cause a shortage of supply.

We have less money here but more money globally. The U.S. is just one nation pumping money into their societies. Some are like us and just seeing that new money (accounting entries) stored.

In fractional banking you have to have $1,000 for each $10,000 as a reserve, $1,000 that can be withdrawn or as a basis for each $9,000 in loans. Right now, many banks were down to some number under $1,000 for each $9,000 and all the money flowing in has been kept to try and get that number back up. So, even with all the money being created it was being created to offset losses that dragged reserve requirements down. There is more to it because of derivatives and higher leverage than 10 to 1 but, the point is, all this money isn’t reaching you and me, ——- Yet.

It is when the recover begins or when the nations that aren’t in deep trouble pump money to their consumers that we will see higher prices whether we are in a recession or depression or not.

Anything globally purchased, like food, will have the price determined by global money supply not U.S. consumers. Thus, all the money that is already out there and all the new money will eventually cause higher prices. How soon?

For some things, like food, it may be sooner than for other things. That is simply because while we cut back on other things, we will keep buying food and so will the millions added each day in emerging markets to the ranks of people eating more than one meal a day. For Aug. China’s retail consumption jumped 23% Other emerging markets are still growing and even if growing much slower, the new consumers will drive food demand up because that is one of the first areas they will spend on.

Related Posts:

• Inflation is rising money supply which we have. Rising CPI is a symptom of inflation, not inflation.
• Money velocity is also a part of the picture.
• I own a business. I see first hand what the recession has done to people’s spending habits.
• We are having deflation at the same time as inflation.
• As long as you have stops to protect from a big drop and you got in early, you should be ok.

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