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They only cause deflation if you don't have a central reserve bank churning out currency to replace that which has been withdrawn. If this did cause deflation,
by madaxe_again 11y ago
They only cause deflation if you don't have a central reserve bank churning out currency to replace that which has been withdrawn. If this did cause deflation, you would be seeing deflation in the markets right now - but you are not, you are seeing inflation due to Q.E..
- aserafini 11y agoSurely it still causes the same amount of deflation whether currency is printed or not? It's just in your case there is also inflation which offsets the deflation: meaning there is slightly less inflation than there would have been without any hoarding?
- firethief 11y ago"When one person pushes on this wall it is stationary; so if two pushed it would move" The action of the Fed is not constant; it is a reaction to the level of inflation/deflation. When the Fed is succeeding in meeting their target, any variation in inflationary/deflationary forces is cancelled. Of course, Fed interventions are not perfect at accomplishing that goal; they don't always have the force to meet their targets, and all interventions have side effects. But to treat the Fed's actions as independent of economic conditions seems to mischaracterise its function entirely.