Avorysuds
Gold Member
Kevin, the Fed does not print money. That is handled by the treasury and is done in accordance with need.
Just because the Fed buys debt does not mean that the Fed has some how managed to get control of the dollar printers.
We need not print money to borrow it in this electronic age.
The fed does not own a literal printing press that it feeds paper and ink into, of course. But when it buys debt, it is using electronic dollars that are made up out of thin air. The government then spends these new dollars, which enter circulation and expand the money supply.
Then once the money makes it's way into banks, fractional reserve lending takes over, ie banks lend out more money than they have. When all is said and done, the bulk of the money expansion has actually been done by banks lending money into existence, and the original amount created by the fed has been amplified by approximately 10:1. This increase in credit drives interest rates down, which allows the government to borrow cheaply, and also benefits interest-rate sensitive industries (the most recent example being home builders).
ie banks lend out more money than they have.
Of course that is not the case.
Every loan is fully funded.
Why does the FED-R not give all the middle class and poor the option to borrow at .2%?