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You can't really raise short term rates while increasing money supply. I'm certainly not going to dispute your point about bank profits, but what you are sugges

• AnthonyMouse 7y ago
  > You can't really raise short term rates while increasing money supply. You can't create the money through making new loans, obviously, because at a higher interest rate people will borrow less. Instead the government does it, analogous to how it mints coins, but by changing number in a computer rather than necessarily physically minting new currency. It could be that new money would cause consumer interest rates to stay low even if the Fed raises the rate the banks pay to borrow money, because they could lend out some of the new money instead of borrowing from the Fed, but if that happens it can be counteracted by increasing their reserve requirements.