Does the US need a central bank (the FED)

[piezoe]

Of course a bank also loans out a fraction of its deposits. That is the cheapest source of money for a bank. They make money on your deposits! But beyond that they borrow what they lend. So they are NOT limited in what they lend to just some fraction of their deposits. Once again, a banks reserve requirements are a function of their liabilities, whereas the loans they make are bank assets.

 

[morganist]

Of course a bank also loans out a fraction of its deposits. That is the cheapest source of money for a bank. They make money on your deposits! But beyond that they borrow what they lend. So they are NOT limited in what they lend to just some fraction of their deposits. Once again, a banks reserve requirements are a function of their liabilities, whereas the loans they make are bank assets.

You seem to be failing to appreciate the process of reserve enlargement that is required to lend further funds out to borrowers. With a reserve requirement, which can alter, a bank can only lend out a certain percentage of its own reserves. It can lend more money out but it has to borrow more money from elsewhere to increase the size of its reserves to be able to lend more money out. The central bank's imposition of a reserve requirement, which is worth doing to protect the depositors' ability to withdraw funds, is an external banking operation which limits a bank's lending capability.

For example if the reserve requirement is 10% of the reserves the bank holds, with a reserve of 100 it can only lend out 90, with a reserve of 120 it can lend out 108. To lend more money the bank has to expand its reserves. The alternative option is to alter the reserve requirement for example reducing it from 10% to 5%. There are two options to increase lending, alter the reserve requirement or enlarge the reserve. If the reserve requirement was not set in the first place the bank would not have to seek funding elsewhere if it held sufficient funds to lend the money itself.

When the central bank forces a reserve requirement it limits the amount of the bank's own reserves which the bank can lend out. Just by setting the reserve requirement the central bank is demanding another process to expand the lending function. The lending function can be expanded internally by the bank if the central bank alters the required reserve ratio. Both or these mechanisms have been used to impact economic growth or to achieve economic targets such as the inflation target. The central bank forced a limit on the banks by introducing a reserve requirement which makes these two mechanisms possible.

 

[piezoe]

You don't need to lecture me on fractional reserve banking. I understand it. (I know very likttle about the British banking system but my guess is it mirrors the u.S. system) What you don't understand is that in the U.S. a banks reserve account at the fed is used for mainly two purposes, one is to clear daily transactions the other is as a means to control the wholesale price of money. (Feel free to read about this elsewhere). The formula used to determine a banks necessary reserves is based on the banks liabilities, chiefly demand deposits like checking or savings accounts. In no way does the reserve account affect the amount a bank can lend! PERIOD. Other things do affect that, but not the reserve account balance. As I have said until I'm now blue in the face, no banker checks there reserve account before they make a loan. If making the loan some how raises their reserve requirement they will meet that requirement via several options including borrowing from other banks at the funds rate. A BANK DOES NOT HAVE TO EXPAND ITS RESERVES TO LEND MORE MONEY because loans are bank assets. You are wrong in so many ways it's astounding! Banks don't want one more penny in their reserve accounts than they absolutely have to have to met their fed requirement. Any change in the reserve balance occasioned by making a loan would come after the loan is made, NOT BEFORE. You were hopelessly wrong about depositors losing money in British Banks, and now you're hopelessly wrong about this.

 

[morganist]

You don't need to lecture me on fractional reserve banking. I understand it. (I know very likttle about the British banking system but my guess is it mirrors the u.S. system) What you don't understand is that in the U.S. a banks reserve account at the fed is used for mainly two purposes, one is to clear daily transactions the other is as a means to control the wholesale price of money. (Feel free to read about this elsewhere). The formula used to determine a banks necessary reserves is based on the banks liabilities, chiefly demand deposits like checking or savings accounts. In no way does the reserve account affect the amount a bank can lend! PERIOD. Other things do affect that, but not the reserve account balance. As I have said until I'm now blue in the face, no banker checks there reserve account before they make a loan. If making the loan some how raises their reserve requirement they will meet that requirement via several options including borrowing from other banks at the funds rate. A BANK DOES NOT HAVE TO EXPAND ITS RESERVES TO LEND MORE MONEY because loans are bank assets. You are wrong in so many ways it's astounding! Banks don't want one more penny in their reserve accounts than they absolutely have to have to met their fed requirement. Any change in the reserve balance occasioned by making a loan would come after the loan is made, NOT BEFORE. You were hopelessly wrong about depositors losing money in British Banks, and now you're hopelessly wrong about this.

I was correct about the depositor's losing money in British Banks there is evidence to prove this but you reject it. You could not identify the difference in a bank run, which is when people withdraw money on mass and a bank default when a bank can no longer continue to operate and ceases trading at a loss to investors. There was a bank run when depositors tried to take money out of the bank on mass, then the bank failed costing investors money and some depositors lost money too due to there being a limit of bank insurance to pay them back. That is what happened and that is what I explained.

I don't understand why you can't see that when the bank needs to borrow more money from the central bank it has to expand its borrowing capability from the central bank by expanding the amount of funds it has. There is one area where I think I may have confused you in my explanation above, that is that in England reserves means all of the holdings the bank has and that the reserve requirement is a percentage of it. Thus by enlarging or expanding the reserve it means to expand the holdings or funds the bank has to lend out. I will amend the above statement I put changing this factor to see if it now makes sense to you. I think you would understand the term I have put as reserves as excess reserves instead of required reserves. Anyway I changed the term reserves to funds or fund holdings.

From the post above.

You seem to be failing to appreciate the process of fund holdings enlargement that is required to lend further funds out to borrowers. With a reserve requirement, which can alter, a bank can only lend out a certain percentage of its own fund holdings. It can lend more money out but it has to borrow more money from elsewhere to increase the size of its fund holdings to be able to lend more money out. The central bank's imposition of a reserve requirement, which is worth doing to protect the depositors' ability to withdraw funds, is an external banking operation which limits a bank's lending capability.

For example if the reserve requirement is 10% of the funds the bank holds, with funds of 100 it can only lend out 90, with funds of 120 it can lend out 108. To lend more money the bank has to expand its fund holdings. The alternative option is to alter the reserve requirement for example reducing it from 10% to 5%. There are two options to increase lending, alter the reserve requirement or enlarge the fund holdings. If the reserve requirement was not set in the first place the bank would not have to seek funding elsewhere if it held sufficient funds to lend the money itself.

When the central bank forces a reserve requirement it limits the amount of the bank's own funds which the bank can lend out. Just by setting the reserve requirement the central bank is demanding another process to expand the lending function. The lending function can be expanded internally by the bank if the central bank alters the required reserve ratio. Both of these mechanisms have been used to impact economic growth or to achieve economic targets such as the inflation target. The central bank forced a limit on the banks by introducing a reserve requirement which makes these two mechanisms possible.

New statement. Basically to expand lending the central bank has to either change the reserve requirement to reduce the amount the bank has to hold in its required reserves or the bank has to borrow more funds to lend out which comes at the price of borrowing.

 

[piezoe]

..default when a bank can no longer continue to operate and ceases trading at a loss to investors.

Previously you confused equity holders (investors) with depositors, and it seems you may still be doing it.

There is no such thing as a "run on the bank" in modern, Western,fractional reserve banking.

Your thinking is stuck in the depression era. Maybe you should update it.

Banks do not have to have excess reserves in order to loan money. If fact they never want to have excess reserves!

You should stop making yourself look like a fool.

 

[morganist]

Previously you confused equity holders (investors) with depositors, and it seems you may still be doing it.

There is no such thing as a "run on the bank" in modern, Western,fractional reserve banking.

Your thinking is stuck in the depression era. Maybe you should update it.

Banks do not have to have excess reserves in order to loan money. If fact they never want to have excess reserves!

You should stop making yourself look like a fool.

Here is a the definition of a Bank Run.

https://www.investopedia.com/terms/b/bankrun.asp

Here is an article stating people queued on mass to withdraw their money from the bank.

https://www.telegraph.co.uk/news/uknews/1563152/Northern-Rock-shares-crash-as-customers-queue.html

There was a bank run at northern rock. Fact.

In the United Kingdom many assets the banks holds are considered reserves there is the required reserve, the excess reserve and the central bank reserve and probably many more. The link below provides a definition.

Here are a couple of explanations. There is required reserves and excess reserves.

https://www.encyclopedia.com/finance/encyclopedias-almanacs-transcripts-and-maps/bank-reserves

https://www.investopedia.com/terms/b/bank-reserve.asp

I do blame some of the disagreements we have on language differences from the different terminology in the United Kingdom to the United States. I admit there has been a couple of times when I have not been clear enough in my articles due to this language difference, which has been updated or subsequently explained. However there are times when you reject simple fact. Fact, there was a time when a high number of depositors withdrew or tried to withdraw their money from Northern Rock, this is a Bank Run.

Fact, there are many types of reserves banks hold and to lend more money some of these reserves have to be expanded. I understand you feel that the excess reserve is something banks want to keep to a minimum, true, but if they want to lend more money out they have to have an increase in excess reserves to have the money they want to lend out, even if it is only for a short time the bank will have to have a greater quantity of funds to be made available to lend out.

Even if the funds are borrowed from another bank or the central bank when the bank receives the money from the lender the brief period when the bank has the money before it lends it out makes the money it has borrowed excess reserves, at least in England. When the bank receives funds they are held by the bank until they are lent out, there is a period before the lending happens when the funds lent to the bank are held are excess reserves on top of the required reserves.

The bank cannot lend out the required reserves but only excess reserves that it holds, even if it is for a short period, the excess reserves which exceed the required reserve will expand. There is a period of bank handling of funds when the excess reserve is expanded to lend newly added funds to the consumer market. It may only be a brief period of time before the excess reserves are transformed in to loans and no longer excess reserves, but there has to be an excess reserve expansion to be able to lend further funds out.

Taking this period or process of excess reserve expansion out of the function of lending would mean there is no bank handling of the funds it borrows from the central bank. If the bank did not handle the funds which consumers borrow then there would be no point in having the bank, borrowers would just receive the funds directly from the central bank. There is a process when the banks borrow funds from other banks or the central bank, hold the funds as excess reserves and then convert the excess reserves in to loans when lent out to borrowers.

In short you have not appreciated the process of a bank handling funds it receives from other banks or the central bank, which it converts from temporary excess reserves to loans. You are missing a process which is performed within banks that enables their ability to receive more funds to expand their lending capability. You have simplified the process of expanding credit to much, ignoring the operations required at a bank to be able to lend more money out to borrowers.

 

[piezoe]

Here is a the definition of a Bank Run.

https://www.investopedia.com/terms/b/bankrun.asp

Here is an article stating people queued on mass to withdraw their money from the bank.

https://www.telegraph.co.uk/news/uknews/1563152/Northern-Rock-shares-crash-as-customers-queue.html

There was a bank run at northern rock. Fact.

In the United Kingdom many assets the banks holds are considered reserves there is the required reserve, the excess reserve and the central bank reserve and probably many more. The link below provides a definition.

Here are a couple of explanations. There is required reserves and excess reserves.

https://www.encyclopedia.com/finance/encyclopedias-almanacs-transcripts-and-maps/bank-reserves

https://www.investopedia.com/terms/b/bank-reserve.asp

I do blame some of the disagreements we have on language differences from the different terminology in the United Kingdom to the United States. I admit there has been a couple of times when I have not been clear enough in my articles due to this language difference, which has been updated or subsequently explained. However there are times when you reject simple fact. Fact, there was a time when a high number of depositors withdrew or tried to withdraw their money from Northern Rock, this is a Bank Run.

Fact, there are many types of reserves banks hold and to lend more money some of these reserves have to be expanded. I understand you feel that the excess reserve is something banks want to keep to a minimum, true, but if they want to lend more money out they have to have an increase in excess reserves to have the money they want to lend out, even if it is only for a short time the bank will have to have a greater quantity of funds to be made available to lend out.

Even if the funds are borrowed from another bank or the central bank when the bank receives the money from the lender the brief period when the bank has the money before it lends it out makes the money it has borrowed excess reserves, at least in England. When the bank receives funds they are held by the bank until they are lent out, there is a period before the lending happens when the funds lent to the bank are held are excess reserves on top of the required reserves.

The bank cannot lend out the required reserves but only excess reserves that it holds, even if it is for a short period, the excess reserves which exceed the required reserve will expand. There is a period of bank handling of funds when the excess reserve is expanded to lend newly added funds to the consumer market. It may only be a brief period of time before the excess reserves are transformed in to loans and no longer excess reserves, but there has to be an excess reserve expansion to be able to lend further funds out.

Taking this period or process of excess reserve expansion out of the function of lending would mean there is no bank handling of the funds it borrows from the central bank. If the bank did not handle the funds which consumers borrow then there would be no point in having the bank, borrowers would just receive the funds directly from the central bank. There is a process when the banks borrow funds from other banks or the central bank, hold the funds as excess reserves and then convert the excess reserves in to loans when lent out to borrowers.

In short you have not appreciated the process of a bank handling funds it receives from other banks or the central bank, which it converts from temporary excess reserves to loans. You are missing a process which is performed within banks that enables their ability to receive more funds to expand their lending capability. You have simplified the process of expanding credit to much, ignoring the operations required at a bank to be able to lend more money out to borrowers.

Look I have never disputed that idiots did not line up to withdraw their money from Northern Rock Bank. Will the existence of a definition of something affect that things existence? I don't think so. None of the Northern Rock Bank depositors who were under the insurance limit lost any money! A run on the bank is a thing of the past in modern, Western, fractional reserve banking. This does not mean there is no definition for a "run on the bank." but such a thing no longer exists in the U.S. If it still exists in the U.K., then god help you, because you live among idiots! And god help UK economics if you have anything to do with it.


In the U.S. Banks avoid excess reserves, if they can! They still make loans however. And what do you think banks in countries that have no reserve requirements do? Do you think they can't make loans because they have no reserve requirement! Your nuts!!! You're absolutely nuts.

 

[morganist]

Look I have never disputed that idiots did not line up to withdraw their money from Northern Rock Bank. Will the existence of a definition of something affect that things existence? I don't think so. None of the Northern Rock Bank depositors who were under the insurance limit lost any money! A run on the bank is a thing of the past in modern, Western, fractional reserve banking. This does not mean there is no definition for a "run on the bank." but such a thing no longer exists in the U.S. If it still exists in the U.K., then god help you, because you live among idiots! And god help UK economics if you have anything to do with it.


In the U.S. Banks avoid excess reserves, if they can! They still make loans however. And what do you think banks in countries that have no reserve requirements do? Do you think they can't make loans because they have no reserve requirement! Your nuts!!! You're absolutely nuts.

There is an issue with definitions you have. A 'Bank Run' is when people withdraw their money or try to withdraw their money from the bank on mass. That is something that could happen regardless of fractional reserve banking and can ruin a bank because it has lost all of its customers regardless of whether the central bank makes good on all of the deposits. If depositors all take their money out of a bank then the bank fails because it no longer has customers who are making deposits. This is the real problem of a bank run and why you will still have them at times in America, because people can choose to bank elsewhere. That is still a bank failure, but as a result of a lack of custom.

You can still have a 'Bank Run' and a ruined bank that has failed regardless of whether the depositors can withdraw their money. In fact their ability to withdraw money from the bank is part of that failure. You have mixed up two processes, one the choice to withdraw money on mass for whatever reason, two the ability for the bank to pay the depositors their money back. In England there was a bank run at Northern Rock when people queued on mass to withdraw their money. There have also been times when banks have failed to pay depositors in the United Kingdom. True it is not a good banking system, on that I agree with you which is why I have developed my work.

You have confused what I am stating about reserve requirements. There is a required reserve that is needed to make sure the bank can pay depositor withdrawals. There are times when banks holds excess reserves above the required reserve. This as you stated is not desired by banks because it slows down the lending process. However excess reserves have to be expanded in the short term to be able to lend more money out to borrowers. The bank has to have the excess reserve to be able to extend its lending, even if it only holds that excess reserve for a short period of time. You are claiming that I have stated that the banks hold on to these excess reserves for a long period of time, this is not what I have stated.

I would like to point out to you another factor which may change your opinion regarding the concept of excess reserves. When banks lend money out especially in modern times it is usually through another process of selling and buying debt packages, which consist of many debt agreements or loans which are sold as a group together to other parties. When I think of debt expansion or the expansion of credit, it is more a case of the central bank allowing commercial banks to borrow money cheaply at a low interest rate, which then allows the commercial banks to buy debt packages which pay a higher rate of interest making a profit from the difference in the central bank interest rate and debt package products interest rate.

When the central bank lowers the interest rate it charges commercial banks can borrow more money at a lower price. The process of a bank borrowing from the central bank temporarily expands its excess reserves enabling the commercial bank to buy more credit products. This expansion of excess reserves is needed to buy the debt products other banks are selling and provides a market to lenders who are selling the packaged debt products. I understand your position but you are looking at it from a centralised position rather than a bank operational position. Your statement at the end indicates you have not understood my explanation of what reserves are, there are many types of reserves not just the required reserve.

Banks can lend money out when there is no reserve requirement, in fact they can lend more money out if there is no reserve requirement. The reserve requirement protects the ability for banks to make depositor withdrawals when they want them but it can be reduced to expand the bank's ability to lend, this is one way lending can be increased. Banks also hold excess reserves which can be lent out, if these excess reserves are expanded temporarily by borrowing from another bank or the central bank the bank's ability to lend is extended. To answer your question countries with no required reserve will have periods when they have excess reserves which they can lend out.

I get your point that excess reserves mean that banks are holding on to funds that they can lend out to borrowers or that they can use to buy packaged debt products, which would slow the economy down. However I feel you are missing my point that there is a mechanism when the central bank lowers the interest rate where commercial banks borrow from the central bank temporarily expanding its excess reserves to then use the newly expanded excess reserves to buy packaged debt products. Just by setting a reserve requirement the central bank limits the amount of funds the commercial banks can lend internally. Further lending requires a process of borrowing and handling the money, even if it is temporary.

 

[morganist]

Look I have never disputed that idiots did not line up to withdraw their money from Northern Rock Bank. Will the existence of a definition of something affect that things existence? I don't think so. None of the Northern Rock Bank depositors who were under the insurance limit lost any money! A run on the bank is a thing of the past in modern, Western, fractional reserve banking. This does not mean there is no definition for a "run on the bank." but such a thing no longer exists in the U.S. If it still exists in the U.K., then god help you, because you live among idiots! And god help UK economics if you have anything to do with it.


In the U.S. Banks avoid excess reserves, if they can! They still make loans however. And what do you think banks in countries that have no reserve requirements do? Do you think they can't make loans because they have no reserve requirement! Your nuts!!! You're absolutely nuts.

There is another way that banks can lend more money out which you have not mentioned and probably the method they would use. Open Market Operations, when banks hold certain assets for example Treasury Bonds the central bank can buy the Treasury Bonds from the bank, giving the bank more cash and the central bank ownership of the Treasury Bond.

The bank has received funds from asset sales although this will still create an increase in excess reserves, which the bank can lend out, because the cash the bank has received from the central bank in exchange for the ownership of the Treasury Bonds is considered a cash reserve. It may only be a short term temporary increase in the excess reserve but it is that.

The link below is to an article which explains the methods a central bank uses to control the economy. I think it explains it in a similar way to my explanation.

https://www.investopedia.com/articles/investing/053115/how-central-banks-control-supply-money.asp

 

[jem]

so much misinformation from Piezoe.

1. The most entertaining is "They have dot-org internet addresses"
I have a dot-org internet address.
Anyone with 21 dollars can go to godaddy and get a dot.org.
This is one of the FED Reserve cannards which shameless liars will repeat over and over even though they have been corrected.

https://www.godaddy.com/domainsearc...vail=1&tmskey=&domainToCheck=fedinflation.org
Fedinflation.org is available
$20.99

2. The FED is not fully audited. They only give out partial audits. They fought every time people like Ron Paul tried to have the become fully audited. They don't even provide M3 for us any more. Piezoe has been lying about FED audits for years. During the last mortgage Crisis they refused to provide an accounting of how many trillions they gave out until they were sued. Piezoe and I have gone over this ... he knows the truth yet he chooses to lie.

3.Another rich one from Piezoe...
"Some even believe the central bank is privately owned for private profit!" See that sweet lie by piezoe...

The fed is a privately owned non profit which creates trillions of dollars and dolls it out to its friends for free or whatever interest rate it wishes to charge. It just created over 9 trillion dollars without the OK from congress. it is as privately owned and controlled... non profit.

4. Yes.. other banks or people have stock. Its true its not a like stock in a publically traded company.... its stick in a private company. Private companies can be privately owned and make all sorts of rules for their stock. Claiming its not like a share of google is a red herring. Its still stock in a privately owned company which creates and distributes trillions of dollars out of thin air and gives it to whomever it wishes.

5. Piezoe is such a."The U.S. Treasury, and by extension the Central Bank, can never run out of money, because the Government is the source of money, although not the complete source of its value. "

Powell just told us the FED does not run out of money because it creates it out of thin air.
Other FED chariman have said the same thing.

The FED creates all the digital money. The FED orders the printing presses to roll. The US Govt borrows to get money.

Now its true the source of the power to create money lies with the Sovereign. But the FED has been granted the franchise to create as much money as it desires. These are Federal Reserve Notes in our wallets. Legal tender in the United States of America. Created at will by the privately owned non profit Federal Reserve. If you are lucky the Fed can just put millions, billions or trillions in your account. They can let you sell bonds for them. They can let purhase assets for them. or they can just create the money and lend it or give it to you.
But that is not really the correct way to view if you own shares. You are just really giving yourself the money.

I find it an interesting to observe the difference in knowledge of the Central Bank between most citizens and those relatively few actively engaged in trading financial instruments. Very few people you might randomly meet on the street have any knowledge whatsoever about their Central Bank, what it does, who regulates it and it's inseparable relation to the Treasury. In fact, it is they themselves that regulate the Central Bank, quite indirectly through their representatives in Congress. In stark contrast to typical citizens' total lack of knowledge, traders in financial instruments -- particularly those who trade stocks and options, and to a lesser extent bonds -- appear to me to have a predilection to harbor, with unaccountable certainty, a mountain of misinformation concerning their Central Bank. It's a clear case of some knowledge being worse than none at all.

Those that fall in the latter group are often stuck in a distant pre-1930s past with regard to central bank operation. They have no idea that the fed is regularly audited both internally and externally, that is is actually an independent branch of the Treasury -- which can only be fully appreciated by examining the consolidated books of both agencies -- that Central Bank profits flow directly back to the Treasury, that the books of both agencies are part of the public record accessible to all -- often in nearly real time, but sometimes with a delay.

Some even believe the central bank is privately owned for private profit! They will point to the Branch banks being run by representatives of the private banking system and to the "stock" that member banks must buy -- a relic of the old fed. They ignore that that "stock" is very different from their own Google stock. In reality, the Branch fed banks are the working banks that handle the day to day operations of the Central Bank. They are the bankers for the private banks in their district. They provide for daily check clearing through both Treasury and Private Bank reserve accounts, the bond trading operations via which aggregate reserve balances are adjusted to target the Fed Funds rate, i.e., the wholesale price of money, and the other day to day functioning needed to regulate, support, coordinate and oversee the nations private, for profit banks. They also assist the Treasury in seeing that the nation's economy has neither too much nor to little money to carry on commerce . They have dot-org internet addresses. These branch banks also support vast amounts of published, economic research via the many Ph.D. Economists they hire. A valuable, but non-remunerative activity, that most private banks would be reluctant to fund.

The U.S. Central Bank is a model for much of the world. Because of it, none of us will ever have to worry whether the bank we use is solvent. As long as we have deposited enough to cover the checks we write, our checks will always clear, regardless of whether the bank we write them on is solvent.

The U.S. Treasury, and by extension the Central Bank, can never run out of money, because the Government is the source of money, although not the complete source of its value. The Government has unlimited ability to both add and subtract money from the private sector economy. Through mismanagement by the legislative and executive branches of government, money could lose its purchasing value, but government can not go bankrupt. There is little, realistic danger of your grand children being saddled with unconscionable debt, or social security being unable to pay your pension. The future dangers lie in something more fundamental.

Money is worth what it can be exchanged for. In the past, there was a more direct link between labor and productivity, therefore it was reasonable after 1971, to regard the U.S. monetary system as on a labor standard. With technological advances, labor and productivity have become increasing detached through automation. Our decreasing labor force and increasing productivity is telling us that. Today's reality is that our fiat money is on a productivity standard. The critical factors are both the amount and distribution of money in society relative to the amount of goods and services to be purchased with that money. The former is what the Treasury and fed working together must wisely manage; the latter what the people, Congress and the President are jointly responsible for.

Our individual, state's, and local government's finances have nothing to do with federal finances. We make a mistake whenever we conflate these and say for example, "Social Security is never going to be there when I need it," or my grand children are going to be saddled with unconscionable debt, etc. These sentiments and worries are not justified by what we know of modern fiat money and its management by government. It's worry based on our experiences with personal finances. But these experiences don't apply to government finances.

What does matter is how adroitly the government supplies money into the economy when it is needed and how adroitly it removes it, or redistributes it, for example between reserve accounts and bonds, when there is too much. To accomplish these things, we have given our government the responsibility of supplying and removing money to and from our economy without causing either untoward inflation or hardship and depression. And, importantly, we have also given our government, whether we think about it our not, the power to influence the distribution of money in our society. The latter is something I expect to be the subject of much active political debate going forward.