In the past week, the Fed lent up to $475 billion to US banks, while an equivalent amount of deposits was withdrawn from the banking system due to the herd effect leading to bank run. Continuing the in-depth macroeconomic analyses from previous articles, this week Viet Hustler will continue to assess the scenario after banking crisis, when inflation concerns may become deflation concerns. The most recent deflation in US economic history caused The Great Depression lasting 10 years (1929-1939).
So why can banking crisis cause deflation? And why must the Fed save the banking system?
Viet Hustler will explain in detail through this week's macroeconomics column.
