Inflation: What You See and What You Don't See - Thorsten Polleit - Mises Institute

Inflation: What You See and What You Don't See - Thorsten Polleit - Mises Institute: "As far as its impact on prices goes, the rise in the monetary base sponsored by the Fed has so far been restricted to an invisible effect.

First and foremost, the base money increase prevents banks' troubled asset prices from adjusting to lower levels. Buyers of these assets have to pay a higher price when compared to the scenario in which the Fed hadn't increased the money supply.

In addition, prohibiting the prices of banks' assets from adjusting downwards keeps markets from performing an essential function, namely, rewarding those players who serve the needs of their clients and pushing those players out of the market who do not.

Furthermore, as prices of banks' troubled assets are kept from declining, the need for revaluing other assets (such as book loans extended to firms, house builders, and governments; bonds; stocks, etc.) tends to decline or is prevented altogether."