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no regulated bank can have a ratio anything like 10X. they have to maintain a liquidity reserve and also have assets on the books equal to most of the rest.  Ordinary banks cannot print money.  

True--it is the Federal Reserve that does the printing.  As a bank, all I can do is borrow money from the Fed to loan out on an overpriced McMansion, which would show up as collateral to balance my books (hopelessly overvalued collateral, it is true) and actually, I would be in a tight spot for doing something so insanely stupid, except that I bundle the loan with others like it and sell it to a security company, which will resell it to some (sucker of an) investor,  and the money supply is now larger to the amount of one absurdly overpriced box of chip-board and chicken-wire.  

Which is what is meant by flooding, and yes it is a form of inflation, far more byzantine but essentially equivalent to firing up the printing presses.  

The Fates are kind.

by Gaianne on Fri Jan 19th, 2007 at 08:51:47 AM EST
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