[Giselle]

I have heard and seen the words 'sterilize' or 'sanitize' used to describe the wanton creation of money by the Fed. I believe this is a term that describes the effect of the money injection on prices (inflation). A lot of money that is created simply goes to the banks to prevent the write-offs of bad loans, to prevent the appearance of bankruptcy by the big banks. If the banks don't lend out this money, it has no effect on prices. What does affect prices are market manipulations of commodities, like what Goldman Sachs does with oil and Chase does with PMs. Also, when the government spends money for a stimulus, that gets into the hands of ordinary people who spend it, and it causes prices to not drop because of the lack of demand. It's all very Keynesian, and it addresses perceptions mostly, and has little effect on reality. With all the money the Fed injects into the banks and lends to government, their sterilization requirement addresses inflation, so prices increase at a much slower rate than you would expect in a free market.


Hatha