It remains to be pointed out that while new injections of currency or bank credit can at first, and temporarily, bring about lower interest rates, persistence in this device must eventually raise interest rates. It does so because new injections of money tend to lower the purchasing power of money. Lenders then come to realize that the money they lend today will buy less a year from now, say, when they get it back. Therefore to the normal interest rate they add a premium to compensate them for this expected loss in their money’s purchasing power.
