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Discussion in 'Economy' started by Paulie, May 1, 2010.

  1. Paulie
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    Paulie Platinum Member

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    I wasn't going to bother with this because of how ridiculous an argument it is, but I refuse to watch someone spew inaccuracies about the Federal Reserve, especially during these current times when it's too dangerous for people to be misinformed.

    You say the Fed does not print money. When you say that in the most literal sense, you are correct. The Bureau of Engraving and Printing actually does the physical printing of the paper notes. But that isn't what people are talking about when they say "print money".

    But what you obviously don't understand is what is actually meant when someone refers to the "printing" of money in regards to the Fed.

    When the Fed performs its open market operations, such as buying securities on the open market, it will either sell assets from its portfolio to institutions, which thereby decreases reserves from said institutions, or it literally creates a specific amount of money out of thin air and enters that money electronically onto its balance sheet to use for the purchasing of securities, which increases reserves at said institutions. When the Fed does not sell assets to offset the purchases, it is called quantitative easing. The Fed has been utilizing quantitative easing since September of 2008, when it officially stopped selling Treasuries from its portfolio.

    The amount of money they have created and added to the monetary base is somewhere in the neighborhood of 1.25 trillion.

    Here's the Fed's most recent chart of the Base, from the St. Louis Fed's website:

    [​IMG]

    Almost the entire amount of money that has contributed the Base's huge increase in that spike consists of newly created bank reserves.

    No one else but the Federal Reserve has the authority to issue money in the United States. I suggest you read the Federal Reserve Act. When the BEP prints money, it is doing it at the direct behest of the Federal Reserve, to be issued to its member banks.

    Let me know if there's any other way in which I can help you reach an adequate level of understanding, so no one is misinformed about such a serious topic.
     
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  2. Jos
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    Jos BANNED

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  3. Paulie
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    Paulie Platinum Member

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    I should clarify...the 1.25 trillion is what the Fed has added to the monetary base only since 2008.
     

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