Reply To: Inflationary vs non-inflationary deficits

[jmherbener]

Banks pay higher interest rates to borrow from savers than they earn from Treasuries of the same maturity. So, they would suffer losses intermediating credit in this way.

http://www.bloomberg.com/markets/rates-bonds/government-bonds/us

http://www.bankrate.com/cd.aspx

They could, of course, borrow short term and lend long term and earn an interest rate differential. But this is risky and issuing fiduciary media, while also risky, is more profitable.