The Banks are preparing for inflation - Credit purchasing power will dimish.

Between 2008/2009 we had what is now known as they credit crisis or financial crisis. The credit markets froze and economies essentially fell off a cliff face. Massive monetary and fiscal policies flooded the global economy with liquidity from bank bailouts through to tax offsets for housing and cars, the idea (albeit simple) was to reinstate spending and consumption, unfreeze the credit markets and allow ecomomy to continue credit expansion (which was the man problem prior to the credit crisis).

Now the tell tales signs are emerging of a next crisis, or a mixture of two (inflationary/debt crisis), the inflationary problem which is beginning now with oil sitting over $85.00 a barrel and gold being bought; both these two commodities represent the falling value in real currencies, at this point the EURO (re: Greece/problems) and later the US dollar. But regardless, both oil and gold are been bought in tandem with the US dollar (currently a risk averse buy). The inflationary precursor is now emerging within the credit markets which derives 'nominal' interest rates from the yields of monetary debt (bonds) and at this point are all steepening (yield curves). This interest rate inflation gauge is then passed on to the consumer, via credit, namley credit cards, car loan and home loans. Simply put credit purchasing power will begin to diminish, a natural curb on credit expansion by the increasing yields on bonds.

The problem of course is that governments and central banks attempting to keep the credit markets liquid, essentially they have, have failed to understand that credit purchasing power measured to inflation will start to diminish eg you end up paying more for credit which means paying more back to the lender. This situation may hamper the housing recovery as the repayments on home loans will increase and asset values decline. The currently reason for yields on debt increasing, therefore real interest rates on credit are going up, is the bond market are over supplied and the value of debt is now coming under question. Which makes investors demand higher yields on the new debt coming onto the market.

The bond markets on a long term view perceive inflation as an eventuality 1. government/s with massive account deficits and trade deficits will need still to print money (to fund deficits), or devalue currencies to correct trade deficits (leading to inflation) 2. The integrity of goverment bonds is now questionably after recent problems with Dubai and Greece and the rest of the indebted EU countries.