Central Banks Don't Create Money.

[Toddsterpatriot]

- According to their story, they are borrowing them. In my initial post on the matter I made it clear that it was a fiction.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

Accounting between the Fed and the Treasury does not conform to GAAP, btw. Some of that is because GAAP describes private entities, but it doesn't describe entities which can issue money. Another part of it is that the Fed and Treasury are in many ways one entity, and the accounting between them can be very strange.

According to your story.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

They do purchase them, at the cost of production. Like a post-it note.
When the Fed sells them to a bank, they become a Fed liability.
Just as a CD becomes a bank liability when a bank sells it to you.


Currency
Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The new-currency budget for 2015 is $717.9 million, and reflects the following costs per denomination:
Note Cost of Production
$1 and $2 4.9 cents per note
$5 10.9 cents per note
$10 10.3 cents per note
$20 and $50 10.5 cents per note
$100 12.3 cents per note

Further details about the production costs for Federal Reserve notes are presented in the 2015 Currency Budget.

FRB How much does it cost to produce currency and coin

First, where does it say they purchase them? If they purchase them why do they have to provide collateral and pay interest?

Paying for the cost of production is not a purchase of the notes.

How would they become a liability by selling them to banks if they were purchased as an asset? Walk me through how that works, please.

So the Fed credits an asset and credits a liability as one transaction? I know they don't exactly follow the same rules as everyone else, but geesh - your theory is going to require a pretty fancy explanation here.

So go ahead and tell me what sort of transaction is described by crediting two accounts simultaneously.

I'll wait.

If they purchase them why do they have to provide collateral and pay interest?

What do they do with the FRNs? They sell them to banks in exchange for reserves.
They use the reserves to buy Treasuries and they pledge the Treasuries.
The interest covers the cost of purchasing and distributing new notes and destroying the old worn ones. The earnings they returned last year were about $100 billion.
based on Treasury and MBS holdings, mostly, not on imaginary interest on FRNs

How would they become a liability by selling them to banks if they were purchased as an asset?

They didn't pay $100 for a $100 FRN. They paid 12.3 cents.
How does a check I write become a $5000 liability if I buy the check for 12.3 cents?

So the Fed credits an asset and credits a liability as one transaction?

Creates an asset...creates a liability.

Seriously, it's accounting. Works that way for everyone.
You deposit a $10 at the bank, you now have a $10 asset (your checking account) the bank now has a $10 liability (your checking account).

 

[Toddsterpatriot]

- According to their story, they are borrowing them. In my initial post on the matter I made it clear that it was a fiction.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

Accounting between the Fed and the Treasury does not conform to GAAP, btw. Some of that is because GAAP describes private entities, but it doesn't describe entities which can issue money. Another part of it is that the Fed and Treasury are in many ways one entity, and the accounting between them can be very strange.

According to your story.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

They do purchase them, at the cost of production. Like a post-it note.
When the Fed sells them to a bank, they become a Fed liability.
Just as a CD becomes a bank liability when a bank sells it to you.


Currency
Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The new-currency budget for 2015 is $717.9 million, and reflects the following costs per denomination:
Note Cost of Production
$1 and $2 4.9 cents per note
$5 10.9 cents per note
$10 10.3 cents per note
$20 and $50 10.5 cents per note
$100 12.3 cents per note

Further details about the production costs for Federal Reserve notes are presented in the 2015 Currency Budget.

FRB How much does it cost to produce currency and coin

- Oh, and your CD example is so wrong.

Banks don't have assets called CDs which are suddenly turned into liabilities when sold.

A bank CREATES a CD when you buy it. It debits an asset or liability account (depending on what you buy the CD with), and credits your CD, which is a deposit account, or liability.

See how the debits and credits always match up?

Your theory of money requires a transaction with two credits and no debits.

Banks don't have assets called CDs which are suddenly turned into liabilities when sold.

Sure they do. It's a white piece of paper and when you buy it, they type your name on it.
They just expanded their balance sheet. They added an asset and a liability.

See how the debits and credits always match up?

I agree. You should stop right there.

 

[Toddsterpatriot]

No, not too complex at all. "When you took out the mortgage, you only paid a small down payment".

The mortgage is still a loan.

The Fed has to collateralize FRNs because they are still owned by the Treasury.

The Fed has to collateralize FRNs because they are still owned by the Treasury.

No, the Fed has to collateralize them in case they ever have to retire them.
Otherwise the Fed could buy a $100 FRN for 12.3 cents and give the profit to the Treasury.
People get worried about inflation when a government does too much of that.

When silver was the collateral behind a silver certificate, did you think the Treasury owned it?
That there was somehow a loan involved?

- now you're just making stuff up.

When you find out what a transaction is called which is completely described by two credits, let me know.

The rest of the world calls it baloney.

When you find out what a transaction is called which is completely described by two credits, let me know.

What 2 credits? Where?

 

[Pksimon2007]

- According to their story, they are borrowing them. In my initial post on the matter I made it clear that it was a fiction.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

Accounting between the Fed and the Treasury does not conform to GAAP, btw. Some of that is because GAAP describes private entities, but it doesn't describe entities which can issue money. Another part of it is that the Fed and Treasury are in many ways one entity, and the accounting between them can be very strange.

According to your story.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

They do purchase them, at the cost of production. Like a post-it note.
When the Fed sells them to a bank, they become a Fed liability.
Just as a CD becomes a bank liability when a bank sells it to you.


Currency
Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The new-currency budget for 2015 is $717.9 million, and reflects the following costs per denomination:
Note Cost of Production
$1 and $2 4.9 cents per note
$5 10.9 cents per note
$10 10.3 cents per note
$20 and $50 10.5 cents per note
$100 12.3 cents per note

Further details about the production costs for Federal Reserve notes are presented in the 2015 Currency Budget.

FRB How much does it cost to produce currency and coin

First, where does it say they purchase them? If they purchase them why do they have to provide collateral and pay interest?

Paying for the cost of production is not a purchase of the notes.

How would they become a liability by selling them to banks if they were purchased as an asset? Walk me through how that works, please.

So the Fed credits an asset and credits a liability as one transaction? I know they don't exactly follow the same rules as everyone else, but geesh - your theory is going to require a pretty fancy explanation here.

So go ahead and tell me what sort of transaction is described by crediting two accounts simultaneously.

I'll wait.

If they purchase them why do they have to provide collateral and pay interest?

What do they do with the FRNs? They sell them to banks in exchange for reserves.
They use the reserves to buy Treasuries and they pledge the Treasuries.
The interest covers the cost of purchasing and distributing new notes and destroying the old worn ones. The earnings they returned last year were about $100 billion.
based on Treasury and MBS holdings, mostly, not on imaginary interest on FRNs

How would they become a liability by selling them to banks if they were purchased as an asset?

They didn't pay $100 for a $100 FRN. They paid 12.3 cents.
How does a check I write become a $5000 liability if I buy the check for 12.3 cents?

So the Fed credits an asset and credits a liability as one transaction?

Creates an asset...creates a liability.

Seriously, it's accounting. Works that way for everyone.
You deposit a $10 at the bank, you now have a $10 asset (your checking account) the bank now has a $10 liability (your checking account).

- You probably need to take up your argument with the Fed at this point.

You should write them and tell them they're wrong.

As far as accounting. You really suck at that. Just don't talk about accounting, okay?

When you say "created an asset, created a liability", uhm,
I don't know where to start with how point-missing that was.

Your example involved you and your bank, but regardless - you would DEBIT your checking balance, the bank would CREDIT your checking balance - those are the same thing. The deposit is an asset to you, a liability to the bank. Todd, debits increase an asset account, credits increase a liability account.

In your scenario between you and your bank, the debits and credits match.

In your theory of currency issue, the Fed helps itself to two credits and no debits.

 

[Pksimon2007]

- According to their story, they are borrowing them. In my initial post on the matter I made it clear that it was a fiction.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

Accounting between the Fed and the Treasury does not conform to GAAP, btw. Some of that is because GAAP describes private entities, but it doesn't describe entities which can issue money. Another part of it is that the Fed and Treasury are in many ways one entity, and the accounting between them can be very strange.

According to your story.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

They do purchase them, at the cost of production. Like a post-it note.
When the Fed sells them to a bank, they become a Fed liability.
Just as a CD becomes a bank liability when a bank sells it to you.


Currency
Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The new-currency budget for 2015 is $717.9 million, and reflects the following costs per denomination:
Note Cost of Production
$1 and $2 4.9 cents per note
$5 10.9 cents per note
$10 10.3 cents per note
$20 and $50 10.5 cents per note
$100 12.3 cents per note

Further details about the production costs for Federal Reserve notes are presented in the 2015 Currency Budget.

FRB How much does it cost to produce currency and coin

- Oh, and your CD example is so wrong.

Banks don't have assets called CDs which are suddenly turned into liabilities when sold.

A bank CREATES a CD when you buy it. It debits an asset or liability account (depending on what you buy the CD with), and credits your CD, which is a deposit account, or liability.

See how the debits and credits always match up?

Your theory of money requires a transaction with two credits and no debits.

Banks don't have assets called CDs which are suddenly turned into liabilities when sold.

Sure they do. It's a white piece of paper and when you buy it, they type your name on it.
They just expanded their balance sheet. They added an asset and a liability.

See how the debits and credits always match up?

I agree. You should stop right there.

- Todd, you're going from "it was a valiant effort" to just freaking dumb.

The bank does not have a bunch of CDs that have not yet been created for depositors on its balance sheet.

Stupid. That's just stupid.

They create the CD when the customer purchases it.

 

[Pksimon2007]

No, not too complex at all. "When you took out the mortgage, you only paid a small down payment".

The mortgage is still a loan.

The Fed has to collateralize FRNs because they are still owned by the Treasury.

The Fed has to collateralize FRNs because they are still owned by the Treasury.

No, the Fed has to collateralize them in case they ever have to retire them.
Otherwise the Fed could buy a $100 FRN for 12.3 cents and give the profit to the Treasury.
People get worried about inflation when a government does too much of that.

When silver was the collateral behind a silver certificate, did you think the Treasury owned it?
That there was somehow a loan involved?

- now you're just making stuff up.

When you find out what a transaction is called which is completely described by two credits, let me know.

The rest of the world calls it baloney.

When you find out what a transaction is called which is completely described by two credits, let me know.

What 2 credits? Where?

- when the central bank converts money which you claim it purchased (which makes it an asset) into a liability when it sells it.

Reducing an asset produces a credit.

Increasing a liability produces a credit

Your transaction is two credits.

 

[Pksimon2007]

They create settlement funds or, as they are called some places, reserves.

Home started by Paul Glover
explains how anyone can organize and issue their own currency legally
Paul Glover social entrepreneur

- Why would somebody who claims to be a constitutionalist ignore Article 1 Section 8?

By freedom of the press anyone is free to print their own currency that represents an agreed system of values or exchange.

No one is required to use the Federal Reserve system. It is private and the public is choosing to use it. if you want to run around and do things for free, or set up your own system of exchange, you can do so voluntarily just like the private investors did who created the Fed.

It is just as legal for people to exchange their own currency, as long as they follow certain laws.
Paying to federal govt requires using federal currency they recognize; so the same tax laws apply on exchanges using alternative currency: state taxes have to be paid to the state using currency or credit the state recognizes and federal taxes using currency or credit the federal govt recognizes.

So can anyone else exchange currency they agree to recognize.
We just can't FORCE people to accept that currency. It remains voluntary.

Right now the federal govt only recognizes federal reserve notes.
So if you want a different system, do the same thing the private investors did,
and set up your own. That's what I recommend, and have consulted with different groups
on how to do this logistically. Some people can set up their system by organizing labor pools and businesses to back the labor. The idea I want to pursue is backing credits that stand for millions in restitution owed to taxpayers for money misspent by corporate abuses and corruption of govt that the public did not authorize. So with the money we are already charged as debts, why not assess how much was Constitutional and legal or not, and then negotiate restitution and correction with cases where the wrongdoers can be tracked who misspent taxpayer money.
Assess the debts and damages, set up credit in an account similar to the Fed, and issue notes or credits to taxpayers that can be invested in programs and reforms/corrections we AGREE to fund. Where the debts are paid off over time by the wrongdoers, not the taxpayers.

We the taxpayers should go on strike and refuse to pay the costs, crimes, debts and damages for anything we deem to be unauthorized, unlawful, unconstitutional, or conflicts of interest in spending federal dollars.

- Freedom of the press means anyone can print money?

lol

 

[Toddsterpatriot]

- According to their story, they are borrowing them. In my initial post on the matter I made it clear that it was a fiction.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

Accounting between the Fed and the Treasury does not conform to GAAP, btw. Some of that is because GAAP describes private entities, but it doesn't describe entities which can issue money. Another part of it is that the Fed and Treasury are in many ways one entity, and the accounting between them can be very strange.

According to your story.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

They do purchase them, at the cost of production. Like a post-it note.
When the Fed sells them to a bank, they become a Fed liability.
Just as a CD becomes a bank liability when a bank sells it to you.


Currency
Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The new-currency budget for 2015 is $717.9 million, and reflects the following costs per denomination:
Note Cost of Production
$1 and $2 4.9 cents per note
$5 10.9 cents per note
$10 10.3 cents per note
$20 and $50 10.5 cents per note
$100 12.3 cents per note

Further details about the production costs for Federal Reserve notes are presented in the 2015 Currency Budget.

FRB How much does it cost to produce currency and coin

First, where does it say they purchase them? If they purchase them why do they have to provide collateral and pay interest?

Paying for the cost of production is not a purchase of the notes.

How would they become a liability by selling them to banks if they were purchased as an asset? Walk me through how that works, please.

So the Fed credits an asset and credits a liability as one transaction? I know they don't exactly follow the same rules as everyone else, but geesh - your theory is going to require a pretty fancy explanation here.

So go ahead and tell me what sort of transaction is described by crediting two accounts simultaneously.

I'll wait.

If they purchase them why do they have to provide collateral and pay interest?

What do they do with the FRNs? They sell them to banks in exchange for reserves.
They use the reserves to buy Treasuries and they pledge the Treasuries.
The interest covers the cost of purchasing and distributing new notes and destroying the old worn ones. The earnings they returned last year were about $100 billion.
based on Treasury and MBS holdings, mostly, not on imaginary interest on FRNs

How would they become a liability by selling them to banks if they were purchased as an asset?

They didn't pay $100 for a $100 FRN. They paid 12.3 cents.
How does a check I write become a $5000 liability if I buy the check for 12.3 cents?

So the Fed credits an asset and credits a liability as one transaction?

Creates an asset...creates a liability.

Seriously, it's accounting. Works that way for everyone.
You deposit a $10 at the bank, you now have a $10 asset (your checking account) the bank now has a $10 liability (your checking account).

- You probably need to take up your argument with the Fed at this point.

You should write them and tell them they're wrong.

As far as accounting. You really suck at that. Just don't talk about accounting, okay?

When you say "created an asset, created a liability", uhm,
I don't know where to start with how point-missing that was.

Your example involved you and your bank, but regardless - you would DEBIT your checking balance, the bank would CREDIT your checking balance - those are the same thing. The deposit is an asset to you, a liability to the bank. Todd, debits increase an asset account, credits increase a liability account.

In your scenario between you and your bank, the debits and credits match.

In your theory of currency issue, the Fed helps itself to two credits and no debits.

The deposit is an asset to you, a liability to the bank.

You deposit a $10 at the bank, you now have a $10 asset (your checking account) the bank now has a $10 liability (your checking account).

Durr.

In your scenario between you and your bank, the debits and credits match.

Yeah, debits and credits match. It's called accounting. Durr.

In your theory of currency issue, the Fed helps itself to two credits and no debits.

You're babbling. The Fed doesn't get 2 credits.

 

[Toddsterpatriot]

- According to their story, they are borrowing them. In my initial post on the matter I made it clear that it was a fiction.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

Accounting between the Fed and the Treasury does not conform to GAAP, btw. Some of that is because GAAP describes private entities, but it doesn't describe entities which can issue money. Another part of it is that the Fed and Treasury are in many ways one entity, and the accounting between them can be very strange.

According to your story.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

They do purchase them, at the cost of production. Like a post-it note.
When the Fed sells them to a bank, they become a Fed liability.
Just as a CD becomes a bank liability when a bank sells it to you.


Currency
Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The new-currency budget for 2015 is $717.9 million, and reflects the following costs per denomination:
Note Cost of Production
$1 and $2 4.9 cents per note
$5 10.9 cents per note
$10 10.3 cents per note
$20 and $50 10.5 cents per note
$100 12.3 cents per note

Further details about the production costs for Federal Reserve notes are presented in the 2015 Currency Budget.

FRB How much does it cost to produce currency and coin

- Oh, and your CD example is so wrong.

Banks don't have assets called CDs which are suddenly turned into liabilities when sold.

A bank CREATES a CD when you buy it. It debits an asset or liability account (depending on what you buy the CD with), and credits your CD, which is a deposit account, or liability.

See how the debits and credits always match up?

Your theory of money requires a transaction with two credits and no debits.

Banks don't have assets called CDs which are suddenly turned into liabilities when sold.

Sure they do. It's a white piece of paper and when you buy it, they type your name on it.
They just expanded their balance sheet. They added an asset and a liability.

See how the debits and credits always match up?

I agree. You should stop right there.

- Todd, you're going from "it was a valiant effort" to just freaking dumb.

The bank does not have a bunch of CDs that have not yet been created for depositors on its balance sheet.

Stupid. That's just stupid.

They create the CD when the customer purchases it.

The bank does not have a bunch of CDs that have not yet been created for depositors on its balance sheet.

I didn't say an uncreated CD was on their balance sheet ya twit.

My post> Just as a CD becomes a bank liability when a bank sells it to you. < My post

See, when they sell it to you, it becomes their liability.

 

[Toddsterpatriot]

No, not too complex at all. "When you took out the mortgage, you only paid a small down payment".

The mortgage is still a loan.

The Fed has to collateralize FRNs because they are still owned by the Treasury.

The Fed has to collateralize FRNs because they are still owned by the Treasury.

No, the Fed has to collateralize them in case they ever have to retire them.
Otherwise the Fed could buy a $100 FRN for 12.3 cents and give the profit to the Treasury.
People get worried about inflation when a government does too much of that.

When silver was the collateral behind a silver certificate, did you think the Treasury owned it?
That there was somehow a loan involved?

- now you're just making stuff up.

When you find out what a transaction is called which is completely described by two credits, let me know.

The rest of the world calls it baloney.

When you find out what a transaction is called which is completely described by two credits, let me know.

What 2 credits? Where?

- when the central bank converts money which you claim it purchased (which makes it an asset) into a liability when it sells it.

Reducing an asset produces a credit.

Increasing a liability produces a credit

Your transaction is two credits.

when the central bank converts money which you claim it purchased

They bought a piece of paper for a few cents.

into a liability when it sells it.

Federal Reserve notes are liabilities of the Fed.
Call it an IOU if that helps you.

Reducing an asset produces a credit.

They sold an IOU, to a bank, in exchange for a reserve balance.
The bank has fewer reserves (an asset) and more FRNs (an asset)
The Fed has more liabilities (FRNs in circulation) and fewer liabilities (bank reserves held as Fed balances)

Your transaction is two credits

Where?

 

[Toddsterpatriot]

They create settlement funds or, as they are called some places, reserves.

Home started by Paul Glover
explains how anyone can organize and issue their own currency legally
Paul Glover social entrepreneur

- Why would somebody who claims to be a constitutionalist ignore Article 1 Section 8?

By freedom of the press anyone is free to print their own currency that represents an agreed system of values or exchange.

No one is required to use the Federal Reserve system. It is private and the public is choosing to use it. if you want to run around and do things for free, or set up your own system of exchange, you can do so voluntarily just like the private investors did who created the Fed.

It is just as legal for people to exchange their own currency, as long as they follow certain laws.
Paying to federal govt requires using federal currency they recognize; so the same tax laws apply on exchanges using alternative currency: state taxes have to be paid to the state using currency or credit the state recognizes and federal taxes using currency or credit the federal govt recognizes.

So can anyone else exchange currency they agree to recognize.
We just can't FORCE people to accept that currency. It remains voluntary.

Right now the federal govt only recognizes federal reserve notes.
So if you want a different system, do the same thing the private investors did,
and set up your own. That's what I recommend, and have consulted with different groups
on how to do this logistically. Some people can set up their system by organizing labor pools and businesses to back the labor. The idea I want to pursue is backing credits that stand for millions in restitution owed to taxpayers for money misspent by corporate abuses and corruption of govt that the public did not authorize. So with the money we are already charged as debts, why not assess how much was Constitutional and legal or not, and then negotiate restitution and correction with cases where the wrongdoers can be tracked who misspent taxpayer money.
Assess the debts and damages, set up credit in an account similar to the Fed, and issue notes or credits to taxpayers that can be invested in programs and reforms/corrections we AGREE to fund. Where the debts are paid off over time by the wrongdoers, not the taxpayers.

We the taxpayers should go on strike and refuse to pay the costs, crimes, debts and damages for anything we deem to be unauthorized, unlawful, unconstitutional, or conflicts of interest in spending federal dollars.

- Freedom of the press means anyone can print money?

lol

Anyone can print money, the trick is getting someone else to accept it as money.
Will you accept my note (liability) in exchange for your car?
My bank will accept my note, in exchange for one.

 

[Pksimon2007]

- According to their story, they are borrowing them. In my initial post on the matter I made it clear that it was a fiction.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

Accounting between the Fed and the Treasury does not conform to GAAP, btw. Some of that is because GAAP describes private entities, but it doesn't describe entities which can issue money. Another part of it is that the Fed and Treasury are in many ways one entity, and the accounting between them can be very strange.

According to your story.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

They do purchase them, at the cost of production. Like a post-it note.
When the Fed sells them to a bank, they become a Fed liability.
Just as a CD becomes a bank liability when a bank sells it to you.


Currency
Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The new-currency budget for 2015 is $717.9 million, and reflects the following costs per denomination:
Note Cost of Production
$1 and $2 4.9 cents per note
$5 10.9 cents per note
$10 10.3 cents per note
$20 and $50 10.5 cents per note
$100 12.3 cents per note

Further details about the production costs for Federal Reserve notes are presented in the 2015 Currency Budget.

FRB How much does it cost to produce currency and coin

First, where does it say they purchase them? If they purchase them why do they have to provide collateral and pay interest?

Paying for the cost of production is not a purchase of the notes.

How would they become a liability by selling them to banks if they were purchased as an asset? Walk me through how that works, please.

So the Fed credits an asset and credits a liability as one transaction? I know they don't exactly follow the same rules as everyone else, but geesh - your theory is going to require a pretty fancy explanation here.

So go ahead and tell me what sort of transaction is described by crediting two accounts simultaneously.

I'll wait.

If they purchase them why do they have to provide collateral and pay interest?

What do they do with the FRNs? They sell them to banks in exchange for reserves.
They use the reserves to buy Treasuries and they pledge the Treasuries.
The interest covers the cost of purchasing and distributing new notes and destroying the old worn ones. The earnings they returned last year were about $100 billion.
based on Treasury and MBS holdings, mostly, not on imaginary interest on FRNs

How would they become a liability by selling them to banks if they were purchased as an asset?

They didn't pay $100 for a $100 FRN. They paid 12.3 cents.
How does a check I write become a $5000 liability if I buy the check for 12.3 cents?

So the Fed credits an asset and credits a liability as one transaction?

Creates an asset...creates a liability.

Seriously, it's accounting. Works that way for everyone.
You deposit a $10 at the bank, you now have a $10 asset (your checking account) the bank now has a $10 liability (your checking account).

- You probably need to take up your argument with the Fed at this point.

You should write them and tell them they're wrong.

As far as accounting. You really suck at that. Just don't talk about accounting, okay?

When you say "created an asset, created a liability", uhm,
I don't know where to start with how point-missing that was.

Your example involved you and your bank, but regardless - you would DEBIT your checking balance, the bank would CREDIT your checking balance - those are the same thing. The deposit is an asset to you, a liability to the bank. Todd, debits increase an asset account, credits increase a liability account.

In your scenario between you and your bank, the debits and credits match.

In your theory of currency issue, the Fed helps itself to two credits and no debits.

The deposit is an asset to you, a liability to the bank.

You deposit a $10 at the bank, you now have a $10 asset (your checking account) the bank now has a $10 liability (your checking account).

Durr.

In your scenario between you and your bank, the debits and credits match.

Yeah, debits and credits match. It's called accounting. Durr.

In your theory of currency issue, the Fed helps itself to two credits and no debits.

You're babbling. The Fed doesn't get 2 credits.

- Of course the Fed doesn't get two credits BECAUSE YOU'RE WRONG, lol.

 

[Pksimon2007]

- According to their story, they are borrowing them. In my initial post on the matter I made it clear that it was a fiction.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

Accounting between the Fed and the Treasury does not conform to GAAP, btw. Some of that is because GAAP describes private entities, but it doesn't describe entities which can issue money. Another part of it is that the Fed and Treasury are in many ways one entity, and the accounting between them can be very strange.

According to your story.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

They do purchase them, at the cost of production. Like a post-it note.
When the Fed sells them to a bank, they become a Fed liability.
Just as a CD becomes a bank liability when a bank sells it to you.


Currency
Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The new-currency budget for 2015 is $717.9 million, and reflects the following costs per denomination:
Note Cost of Production
$1 and $2 4.9 cents per note
$5 10.9 cents per note
$10 10.3 cents per note
$20 and $50 10.5 cents per note
$100 12.3 cents per note

Further details about the production costs for Federal Reserve notes are presented in the 2015 Currency Budget.

FRB How much does it cost to produce currency and coin

- Oh, and your CD example is so wrong.

Banks don't have assets called CDs which are suddenly turned into liabilities when sold.

A bank CREATES a CD when you buy it. It debits an asset or liability account (depending on what you buy the CD with), and credits your CD, which is a deposit account, or liability.

See how the debits and credits always match up?

Your theory of money requires a transaction with two credits and no debits.

Banks don't have assets called CDs which are suddenly turned into liabilities when sold.

Sure they do. It's a white piece of paper and when you buy it, they type your name on it.
They just expanded their balance sheet. They added an asset and a liability.

See how the debits and credits always match up?

I agree. You should stop right there.

- Todd, you're going from "it was a valiant effort" to just freaking dumb.

The bank does not have a bunch of CDs that have not yet been created for depositors on its balance sheet.

Stupid. That's just stupid.

They create the CD when the customer purchases it.

The bank does not have a bunch of CDs that have not yet been created for depositors on its balance sheet.

I didn't say an uncreated CD was on their balance sheet ya twit.

My post> Just as a CD becomes a bank liability when a bank sells it to you. < My post

See, when they sell it to you, it becomes their liability.

- Some people can't man up and admit when they're wrong.

Sadly, you'll be just as wrong next time you debate the issue as this time, because you refuse to adjust your beliefs to reality.

 

[Toddsterpatriot]

According to your story.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

They do purchase them, at the cost of production. Like a post-it note.
When the Fed sells them to a bank, they become a Fed liability.
Just as a CD becomes a bank liability when a bank sells it to you.


Currency
Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The new-currency budget for 2015 is $717.9 million, and reflects the following costs per denomination:
Note Cost of Production
$1 and $2 4.9 cents per note
$5 10.9 cents per note
$10 10.3 cents per note
$20 and $50 10.5 cents per note
$100 12.3 cents per note

Further details about the production costs for Federal Reserve notes are presented in the 2015 Currency Budget.

FRB How much does it cost to produce currency and coin

First, where does it say they purchase them? If they purchase them why do they have to provide collateral and pay interest?

Paying for the cost of production is not a purchase of the notes.

How would they become a liability by selling them to banks if they were purchased as an asset? Walk me through how that works, please.

So the Fed credits an asset and credits a liability as one transaction? I know they don't exactly follow the same rules as everyone else, but geesh - your theory is going to require a pretty fancy explanation here.

So go ahead and tell me what sort of transaction is described by crediting two accounts simultaneously.

I'll wait.

If they purchase them why do they have to provide collateral and pay interest?

What do they do with the FRNs? They sell them to banks in exchange for reserves.
They use the reserves to buy Treasuries and they pledge the Treasuries.
The interest covers the cost of purchasing and distributing new notes and destroying the old worn ones. The earnings they returned last year were about $100 billion.
based on Treasury and MBS holdings, mostly, not on imaginary interest on FRNs

How would they become a liability by selling them to banks if they were purchased as an asset?

They didn't pay $100 for a $100 FRN. They paid 12.3 cents.
How does a check I write become a $5000 liability if I buy the check for 12.3 cents?

So the Fed credits an asset and credits a liability as one transaction?

Creates an asset...creates a liability.

Seriously, it's accounting. Works that way for everyone.
You deposit a $10 at the bank, you now have a $10 asset (your checking account) the bank now has a $10 liability (your checking account).

- You probably need to take up your argument with the Fed at this point.

You should write them and tell them they're wrong.

As far as accounting. You really suck at that. Just don't talk about accounting, okay?

When you say "created an asset, created a liability", uhm,
I don't know where to start with how point-missing that was.

Your example involved you and your bank, but regardless - you would DEBIT your checking balance, the bank would CREDIT your checking balance - those are the same thing. The deposit is an asset to you, a liability to the bank. Todd, debits increase an asset account, credits increase a liability account.

In your scenario between you and your bank, the debits and credits match.

In your theory of currency issue, the Fed helps itself to two credits and no debits.

The deposit is an asset to you, a liability to the bank.

You deposit a $10 at the bank, you now have a $10 asset (your checking account) the bank now has a $10 liability (your checking account).

Durr.

In your scenario between you and your bank, the debits and credits match.

Yeah, debits and credits match. It's called accounting. Durr.

In your theory of currency issue, the Fed helps itself to two credits and no debits.

You're babbling. The Fed doesn't get 2 credits.

- Of course the Fed doesn't get two credits BECAUSE YOU'RE WRONG, lol.

Of course I never said the Fed got 2 credits.
Because you're goofy.

 

[Toddsterpatriot]

According to your story.

Your contention was that the Fed purchased them. You were wrong - if they purchased them, they would ALSO show up as an asset, no?

They do purchase them, at the cost of production. Like a post-it note.
When the Fed sells them to a bank, they become a Fed liability.
Just as a CD becomes a bank liability when a bank sells it to you.


Currency
Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The new-currency budget for 2015 is $717.9 million, and reflects the following costs per denomination:
Note Cost of Production
$1 and $2 4.9 cents per note
$5 10.9 cents per note
$10 10.3 cents per note
$20 and $50 10.5 cents per note
$100 12.3 cents per note

Further details about the production costs for Federal Reserve notes are presented in the 2015 Currency Budget.

FRB How much does it cost to produce currency and coin

- Oh, and your CD example is so wrong.

Banks don't have assets called CDs which are suddenly turned into liabilities when sold.

A bank CREATES a CD when you buy it. It debits an asset or liability account (depending on what you buy the CD with), and credits your CD, which is a deposit account, or liability.

See how the debits and credits always match up?

Your theory of money requires a transaction with two credits and no debits.

Banks don't have assets called CDs which are suddenly turned into liabilities when sold.

Sure they do. It's a white piece of paper and when you buy it, they type your name on it.
They just expanded their balance sheet. They added an asset and a liability.

See how the debits and credits always match up?

I agree. You should stop right there.

- Todd, you're going from "it was a valiant effort" to just freaking dumb.

The bank does not have a bunch of CDs that have not yet been created for depositors on its balance sheet.

Stupid. That's just stupid.

They create the CD when the customer purchases it.

The bank does not have a bunch of CDs that have not yet been created for depositors on its balance sheet.

I didn't say an uncreated CD was on their balance sheet ya twit.

My post> Just as a CD becomes a bank liability when a bank sells it to you. < My post

See, when they sell it to you, it becomes their liability.

- Some people can't man up and admit when they're wrong.

Sadly, you'll be just as wrong next time you debate the issue as this time, because you refuse to adjust your beliefs to reality.

Some people can't man up and admit when they're wrong.

But enough about you.
What was the purpose of this thread?
Besides displaying your confusion?

 

[TC_Triple3]

WOW! Really?

This thread is an exercise in verbosity! Creating deposits, or lending deposits, it's a subtle difference. Is the Fractional Reserve Banking System the primary contributor to monetary inflation? Yes it is. Is the entire system, for all intents and purposes, insolvent? Yes it is. You know full well that if we all go to our banks tomorrow to withdrawal our money the jig is up.

Does the Federal Reserve also contribute to monetary inflation? Does deficit spending do this as well?

Rather than focus on minutia wouldn't it be better to focus on that and the effects that is has on the economy? Why, that would be silly! Nah, better to spend ten pages stroking your ego.

 

[Pksimon2007]

First, where does it say they purchase them? If they purchase them why do they have to provide collateral and pay interest?

Paying for the cost of production is not a purchase of the notes.

How would they become a liability by selling them to banks if they were purchased as an asset? Walk me through how that works, please.

So the Fed credits an asset and credits a liability as one transaction? I know they don't exactly follow the same rules as everyone else, but geesh - your theory is going to require a pretty fancy explanation here.

So go ahead and tell me what sort of transaction is described by crediting two accounts simultaneously.

I'll wait.

If they purchase them why do they have to provide collateral and pay interest?

What do they do with the FRNs? They sell them to banks in exchange for reserves.
They use the reserves to buy Treasuries and they pledge the Treasuries.
The interest covers the cost of purchasing and distributing new notes and destroying the old worn ones. The earnings they returned last year were about $100 billion.
based on Treasury and MBS holdings, mostly, not on imaginary interest on FRNs

How would they become a liability by selling them to banks if they were purchased as an asset?

They didn't pay $100 for a $100 FRN. They paid 12.3 cents.
How does a check I write become a $5000 liability if I buy the check for 12.3 cents?

So the Fed credits an asset and credits a liability as one transaction?

Creates an asset...creates a liability.

Seriously, it's accounting. Works that way for everyone.
You deposit a $10 at the bank, you now have a $10 asset (your checking account) the bank now has a $10 liability (your checking account).

- You probably need to take up your argument with the Fed at this point.

You should write them and tell them they're wrong.

As far as accounting. You really suck at that. Just don't talk about accounting, okay?

When you say "created an asset, created a liability", uhm,
I don't know where to start with how point-missing that was.

Your example involved you and your bank, but regardless - you would DEBIT your checking balance, the bank would CREDIT your checking balance - those are the same thing. The deposit is an asset to you, a liability to the bank. Todd, debits increase an asset account, credits increase a liability account.

In your scenario between you and your bank, the debits and credits match.

In your theory of currency issue, the Fed helps itself to two credits and no debits.

The deposit is an asset to you, a liability to the bank.

You deposit a $10 at the bank, you now have a $10 asset (your checking account) the bank now has a $10 liability (your checking account).

Durr.

In your scenario between you and your bank, the debits and credits match.

Yeah, debits and credits match. It's called accounting. Durr.

In your theory of currency issue, the Fed helps itself to two credits and no debits.

You're babbling. The Fed doesn't get 2 credits.

- Of course the Fed doesn't get two credits BECAUSE YOU'RE WRONG, lol.

Of course I never said the Fed got 2 credits.
Because you're goofy.

- Yet the transactions you propose assume they

WOW! Really?

This thread is an exercise in verbosity! Creating deposits, or lending deposits, it's a subtle difference. Is the Fractional Reserve Banking System the primary contributor to monetary inflation? Yes it is. Is the entire system, for all intents and purposes, insolvent? Yes it is. You know full well that if we all go to our banks tomorrow to withdrawal our money the jig is up.

Does the Federal Reserve also contribute to monetary inflation? Does deficit spending do this as well?

Rather than focus on minutia wouldn't it be better to focus on that and the effects that is has on the economy? Why, that would be silly! Nah, better to spend ten pages stroking your ego.

- How can you focus on "effects" if you don't understand how the system works? If you can't distinguish effects produced by "the system" from other effects, your "solutions" are more than likely not going to solve the problems you see.

It's rare to see people defending the virtues of ignorance.

 

[Toddsterpatriot]

If they purchase them why do they have to provide collateral and pay interest?

What do they do with the FRNs? They sell them to banks in exchange for reserves.
They use the reserves to buy Treasuries and they pledge the Treasuries.
The interest covers the cost of purchasing and distributing new notes and destroying the old worn ones. The earnings they returned last year were about $100 billion.
based on Treasury and MBS holdings, mostly, not on imaginary interest on FRNs

How would they become a liability by selling them to banks if they were purchased as an asset?

They didn't pay $100 for a $100 FRN. They paid 12.3 cents.
How does a check I write become a $5000 liability if I buy the check for 12.3 cents?

So the Fed credits an asset and credits a liability as one transaction?

Creates an asset...creates a liability.

Seriously, it's accounting. Works that way for everyone.
You deposit a $10 at the bank, you now have a $10 asset (your checking account) the bank now has a $10 liability (your checking account).

- You probably need to take up your argument with the Fed at this point.

You should write them and tell them they're wrong.

As far as accounting. You really suck at that. Just don't talk about accounting, okay?

When you say "created an asset, created a liability", uhm,
I don't know where to start with how point-missing that was.

Your example involved you and your bank, but regardless - you would DEBIT your checking balance, the bank would CREDIT your checking balance - those are the same thing. The deposit is an asset to you, a liability to the bank. Todd, debits increase an asset account, credits increase a liability account.

In your scenario between you and your bank, the debits and credits match.

In your theory of currency issue, the Fed helps itself to two credits and no debits.

The deposit is an asset to you, a liability to the bank.

You deposit a $10 at the bank, you now have a $10 asset (your checking account) the bank now has a $10 liability (your checking account).

Durr.

In your scenario between you and your bank, the debits and credits match.

Yeah, debits and credits match. It's called accounting. Durr.

In your theory of currency issue, the Fed helps itself to two credits and no debits.

You're babbling. The Fed doesn't get 2 credits.

- Of course the Fed doesn't get two credits BECAUSE YOU'RE WRONG, lol.

Of course I never said the Fed got 2 credits.
Because you're goofy.

- Yet the transactions you propose assume they

WOW! Really?

This thread is an exercise in verbosity! Creating deposits, or lending deposits, it's a subtle difference. Is the Fractional Reserve Banking System the primary contributor to monetary inflation? Yes it is. Is the entire system, for all intents and purposes, insolvent? Yes it is. You know full well that if we all go to our banks tomorrow to withdrawal our money the jig is up.

Does the Federal Reserve also contribute to monetary inflation? Does deficit spending do this as well?

Rather than focus on minutia wouldn't it be better to focus on that and the effects that is has on the economy? Why, that would be silly! Nah, better to spend ten pages stroking your ego.

- How can you focus on "effects" if you don't understand how the system works? If you can't distinguish effects produced by "the system" from other effects, your "solutions" are more than likely not going to solve the problems you see.

It's rare to see people defending the virtues of ignorance.

- Yet the transactions you propose assume they

Nope. Not even a little.

 

[Toddsterpatriot]

- Reserves!

Cool. Back in my original example, I had $10 million in deposits.
Now they sit at the Fed. $1 million is required reserves. $9 million are excess reserves.
I can loan $9 million. $9 million of the deposits I received.

It works with cash deposits too.

- How about we let the Bank of England explain this to you:

"Money creation in practice differs from some popular misconceptions — banks do not act simply
as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’
central bank money to create new loans and deposits."

"
The reality of how money is created today differs from the description found in some economics textbooks:
• Rather than banks receiving deposits when households save and then lending them out, bank lending creates
deposits."

The Fed works in the same way as the BoE, and banking in England works the same way as it does here - and around the world.

Quarterly Bulletin 2014 Q1 Bank of England

- How about we let the Bank of England explain this to you:

It's more fun correcting your errors.

- Oddly, the Bank of England and the Fed have agreed with me on everything so far, and disagreed with you.

Even the article from the Fed WHICH YOU POSTED agreed with me.

So are the Fed and the Bank of England wrong about how they work?

Even the article from the Fed WHICH YOU POSTED agreed with me.

This thread is way too long.
Please show me which portion of a Fed article agreed with which post of yours and disagreed with which post of mine.

So are the Fed and the Bank of England wrong about how they work?

No, just you.

- I cited it in the post above, lol - remember where your source said that the Fed had to provide collateral for all FRNs in circulation?

What is collateral?

Security for a loan.

I also posted from the Fed where they explicitly SAID they borrowed them from Treasury and turned over all of their profits as interest payments.

Dang. Do you even bother to read, or is the cackle and guffaw machine on autopilot?

I also posted the Bank of England article explaining that banks do not lend deposits, but CREATE deposits when they lend.

This is not rocket science, but you have to read what is posted to understand how stuff works.

I also posted the Bank of England article explaining that banks do not lend deposits, but CREATE deposits when they lend.

It's clear you don't understand what that means. Allow me.
Let's say a customer named PK goes to the bank to borrow money for economics classes.
He's going to borrow $10,000. When he signs the loan documents, the bank creates a deposit account in the name of PK. This account now contains $10,000. With me so far?
The bank doesn't need any deposits at this point to fund this loan, PK's deposit account covers PK's loan.
Now PK writes a check out of his deposit account for $10,000, to pay for tuition.
At this point the bank needs to drum up enough deposits to cover the loan, plus any reserve requirement, if any.
They don't have to collect these deposits on their own, they could borrow excess reserves from another bank that had "excess deposits". In that case, the 2nd banks deposits were loaned out.
In either case, without deposits, that $10,000 loan check will bounce.

Let me know if you're still confused about the role deposits play in the lending process.

 

[TC_Triple3]

How can you focus on "effects" if you don't understand how the system works? If you can't distinguish effects produced by "the system" from other effects, your "solutions" are more than likely not going to solve the problems you see.

It's rare to see people defending the virtues of ignorance.

So, you're saying that unless someone understands the subtle difference between creating deposits and loaning deposits that you can't discuss the the effects of this? OK, if you insist. The same goes for the Federal Reserve and how it acquires U.S. Treasury Bonds. It's completely absurd to say you can't discuss how this affects the economy without all of the details.

That is no different than saying you can't discuss the features and functionality of a Microsoft Windows platform without all of the details about the code.

You're pumping your own ego and that's it. Few are going to bother with this thread because it's unnecessarily verbose. Its not about defending the virtues of ignorance, it's about having a discussion that most people can understand that helps them see how all of this has an impact on their lives, versus an Economics course on banking.

But if you insist that everyone MUST understand this at the level you claim to understand the effects, then have at it. At least your ego will be happy.