still cant suss inflation vs deflation , page-4

Because instead of those banks then going on reckless lending sprees(google search 'fractional banking') they hang onto it and don't lend to other banks and at the end of the spectrum tighten lending to home buyers, reducing the overall money supply........exact opposite of inflation.

Inflation is not rising consumer prices due to increased consumer spending(as the media prtrays), it is the increase in the money supply from the Fed(in oz the RBA) and then the banks through fractional lending.

You might have heard recently that the big banks are increasing their interest rates they charge each other for lending because they're losing faith in one another's ability to make good on loans. This is the 'rising costs of funds' that the media has been telling us and the end result is a slowing economy, recession/depression and deflation.

The Fed on the other hand are just about to come up with a plan to prevent this by pumping in billions of cheap cash to keep these banks going. The question is, will it be enough. In a normal environment, these banks then lend 90% of it to the next bank and then that bank lends 90% of what it receives from the 1st bank and so on and so on. This activity will slow or stop because the banks are way too leveraged and have taken write downs on assets and need the cash they get from the Fed to maintain a certain percentage of liqiudity.

This causes a shrinking money supply......deflation!