“But the big ‘post-bailout’ paradox remains, and this is the central question of the recession vs. recovery tension we live in right now. The broader economy cannot survive if the banks do not lend to businesses. If they don’t, many more earnings will be at stake than just the financial sector from December 2008. Thousands of businesses need lines of credit to keep running month-to-month, and if the banks don’t lend to sustain these businesses, the talk of recovery is a dream and unemployment will continue upward. But if the banks do lend, then that huge infusion from the monetary base will no longer stay deposited with the Federal Reserve. But then the ‘fractional reserve’ factor will kick in, and that $700 billion will enter public circulation as several trillion. If this happens, we will see terrible price inflation and perhaps new speculative bubbles in some sectors.”

Read more: The Stock Market’s Secret.

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