via @OccupyWisdom :
1/ Falsely reported consumer inflation & asset inflation create bubbles.
If consumer inflation is considered “low” it will keep the rate of interest low. This creates relaxed lending & easier borrowing, leading to investment in equities & real
estate. These asset prices will rise as a result, so lenders becoming even more willing to lend more against the assets as borrowers are willing to borrow more to own them. This is how money printing gets funneled into bubbles.
If corporations borrow the printed money to buy
3/ their own stock back, stock prices will rise. Rising stock prices lead to retail investors buying stock.
Soon consumer inflation is impossible to hide and rates have to rise, leading to the bubble bursting.
This leads to rates being lowered below the rate of inflation
(Free money) for X amount of years.
The free money is again channeled into assets to repeat the process.