How most of the problems occurring in this situation stems from that inflexible money supply. With the Fed choosing to forego monetary policy, other factors in the market will naturally adjust to meet an equilibrium. In the example given, its the interest rate that rises as a result. The demand for money goes up which drives up interest rates. This is partly due to the demand for interest bearing bonds decreasing which induces bond trades to raise interest rates to attract any potential buyers. Another consequence of a constant money supply is that bank runs become much more possible. Without some form of government intervention, people may be spooked enough to begin withdrawing all their savings. If too many deposits are withdrawn, the bank may not have enough funds on hand to repay depositors and end up insolvent. Even though the Federal Deposit Insurance Corporation ensures up to 250,000 dollars of deposits, banks would still be in danger of failing which hurts the economy overall.