Originally posted by dsc
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1) For years and years banks gave out loans.
2) Those loans were for mortgages, cars etc. You need a loan? No problem says the bank. The money is in your account.
3) That money is just a number of a screen. The bank created money (whilst the central bank did not).
4) Wait, what did you just say? The bank said this number on the screen is now yours to buy the house/car but no actual money existed to back it up. No value was created / added - hence no inflation.
5) Retail banks are creators of the money supply. That was the duty of central banks. Now central have no place in the world and are dying.
5) But we're creating money now, so why no inflation? Because central banks are now trying to print enough money that was created out of thin air by retail banks. The 'actual supply of money' is less than the 'digital supply'. In fact the derivatives market is worth many multiples of the FED balance sheet. North of $200 trillion!
To answer your question. Why no inflation? Why is gold not rocketing up? Gold has actually increased 10x over the last 20 years and *real money* about 7x, yes even after all the printing to date.
Inflation is not coming... deflation is. And it'll be huge. There's reports from around the world of warehouses full to bursting with goods, India with far too much sugar production, oil no one is using, we have a massive oversupply problem at the moment. Now those suppliers will lower prices to get a sale. And people will think, oh it is cheaper this month, I'll wait until next month for it to be cheaper still thereby making a bad problem worse.
This will continue until deflation hits a peak and that oversupply is used it up. The inflation can start again. Buy gold at that point, but not before.
Professor Richard Werner provides an excellent description of the current flaws in the UK banking system:
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