Readers of this may blog may recall I've mentioned scenario this many times. Now it's being reported upon:
Aug 1 (Reuters) - The overnight rate on U.S. repurchase agreements hit its highest level since December on Monday because of less cash in the banking system due to settlement of last week's $99 billion in Treasuries auctions and reluctance among U.S. money market funds to lend.
Amid the daily barrage of inflation warnings, how could there be a cash shortage? I know it's counter-intuitive, but in a system built on credit and debt it's very easy to have multiples of dollar credits "on the books" and not enough actual dollars to back them up.
Let them make up any excuse as to why, just be aware that while credit is everywhere, cash is in short supply.
Try as it may, the government has not yet been able to rescind the law of supply and demand. Until it does, there will be no monetary inflation and no way out for the Keynesians.
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