Quote from scriabinop23:
...the arbitrary ability of the Fed to create 0% interest perpetual notes (debt) out of thin air is what makes the Fed unique.
Quote from Stosh:
So, I suppose the only restraint on the govt financing itself this way would be the complaints from savers and fixed income folks when inflation results.
Quote from Stosh:
Are you saying that when the Fed prints money it is as if they had struck a gold mine in their back yard.....they are creating the money out of thin air. If so, that really pisses me off. Let's say a counterfeiter were printing billions of dollars and spreading it out among the poor or building roads with it.......would that be similar to what govt does? So, I suppose the only restraint on the govt financing itself this way would be the complaints from savers and fixed income folks when inflation results. Otherwise, they might as well just finance this way and forget about all the complexities of borrowing and taxing. I'm rambling, but would appreciate your comments since it does appear that you know whereof you speak. Thanks, Stosh
Quote from scriabinop23:
Well they can do this up to a point.. But remember -- the exchange rate and value of the currency is dictated by the action that occurs on the margin. At a certain point, this money moves around and the dollar loses its viability.
But yes, you basically got this right. Also realize the fed needs to print just to offset productivity increases and population increases, otherwise deflation will set in (discouraging investment and trend growth)... Thus this is where inflation targeting is justified from.
Quote from Stosh:
So, when they provide this service of printing to offset productivity and population increases they are still taking in wealth, just like my altruistic counterfeiter would be doing. And when you throw in the complexity of the flimsy fractional reserve banking system which also creates money, it doesn't inspire much confidence to me. I hope Timothy Geitner understands this stuff!! Seriously, I know he does, but I have my doubts as to the % of politicians that do. They just think money grows on trees. Stosh
Quote from Stosh:
So, when they provide this service of printing to offset productivity and population increases they are still taking in wealth, just like my altruistic counterfeiter would be doing. And when you throw in the complexity of the flimsy fractional reserve banking system which also creates money, it doesn't inspire much confidence to me. I hope Timothy Geitner understands this stuff!! Seriously, I know he does, but I have my doubts as to the % of politicians that do. They just think money grows on trees. Stosh
Shakes HeadQuote from scriabinop23:
The level of ignorance here astonishes me.
Money supply is a seperate measure, and can be arbitrarily created or destroyed. The fed creates money by creating a currency liability and buying an asset (usually treasuries) on its balance sheet.
The fed could print 6T-7T right now and arbitrarily gift it to the US govt, effectively paying off the total national debt. That would of course be very inflationary...
Also... All profits the Fed makes off the banking system etc are then distributed to the US treasury. There is no fraud or scheme here. It is collectively the US govt balance sheet.
I recommend you spend some time on econbrowser.com ... you are massively confused and should immediately stop giving out your perception of 'knowledge'.
Quote from the1:
What puzzles me is why the government can issue a bond, which is nothing more than a promise to pay but it can't issue it's own currency, which, likewise, would be nothing more than a promise to pay. The US's debt is backed by the full faith and credit of the US Government and their power to levy taxes so why can't the US issue its own currency, which would also be backed by the full faith and credit of the US Government and its power to levy taxes?