Feeding the monster

James Turk of the Gold Money Report writes:
"... This significant shift in bank assets has implications for the economy and the US dollar.
Instead of depositor money being used to stimulate economic activity in the private sector by lending to businesses and consumers, the banks are helping to fund the growing federal deficits.  This re-allocation of resources has a negative long-term impact on the economy.  Depositor money is not being used for productive purposes like building manufacturing plants and making other investments that will create jobs and grow the economy.  It is being spent by the government, which consumes in the present and does not invest for the future.
This shift in bank assets also has negative implications for the dollar.  As the realization grows that the financial condition of the federal government is not much different from Greece and the dozens of other over-indebted countries, the value of US government paper declines as a consequence of the US government’s deteriorating creditworthiness.  Given that the quality of bank assets perforce determines the quality of the dollar, deterioration, i.e., debasement, of the dollar is inevitable as banks funnel depositor money into US government paper instead of making loans.
Lastly, the reduction in bank loans does not mean the money supply is shrinking.  Rather, it is simply changing.  More and more dollars (i.e., the liabilities on bank balance sheets) are being backed (i.e., the assets on bank balance sheets) by US government debt instead of loans to the private sector."
Full text
Comment: Because of the shift of bank assets from private to public debtors, the deflationists are probably wrong. A change from private to public debt is the most direct channel available to increase demand without a corresponding expansion of production. It is the attempt of the US central bank to save the banks at the costs of the real economy. Yet this is a game without a winner because in the end, when hyperinflation strikes, the financial sector will come crashing down along with the economy. Central banking in the US has reached a stage of irresponsibility and recklessness like never before.