He was right. US FED prints money. What do you call their balance sheet. Arguing semantics because Bernacke 2.0 promises to pay it back 'someday'?!?@?
Commercial banks create bank credit aka money out of nothing. Bro, we've been here for nearly a decade. Time to learn this shit. Modern Money Mechanics by the FED. Or wiki fractional reserve banking. They make bank credit out of nothing dude. w
I am not debating with you about creating money out of thin air. I agree. However, banks do not lend reserves. A bank's reserves are on deposit at the Fed. Banks cannot lend reserves. If a bank was lending reserves, it wouldn't be creating money out of nothing. It would be lending reserves. Banks are not reserve constrained. If they do not have enough reserves after a day a lending, they simple borrow from another bank or the Fed to meet requirements. Hence, no fractional reserve.
It has absolutely nothing to do with political leanings. That post was 100% apolitical. It has only to do with how the modern fiat monetary system works in the US. You are completely wrong and have no idea what you are talking about. I can easily post white papers from central banks and economist that will prove you wrong but I have no interest in educating you. BTW - I initially learned some of the mechanics of the US fiat monetary system from hard left liberal. So you believe that the US gov doesn't print money. Blahahahahahahah. Do the fairies drop it off in bags? Lets try to make this real simply for you and not get into all the creation of money in the current fiat monetary system. Go do a google search and get back to the tread on who creates coinage in the US. You know......like quarters and dimes.
Perhaps another easy way to understand it is like this: The US Government needs 100$ It 'Creates' (out of thin air) a Paper (in essence an IOU) for 100$ and sells it as a 'Bond'. A buyer buys this Bond for 100$ of real money. The US Government now has 100$ Extra *CASH* (but also a 100$ outstanding IOU). The US Government then spends this 100$ cash to pay off its debts. The follow up question then is where did the buyer find this 100$ cash. The buyer either directly or indirectly got it from the Government (in the form of government funded projects, social pensions, tax rebates, etc.) or from someone who got it from the government. All cash comes from the US Government who 'creates' this US cash. In addition to converting IOU Paper into Cash for distribution, The Federal Reserve Bank *creates* cash out of thin air in the form of interest payments: Banks deposit 100$ with The Fed (required to by law). At an interest rate of 0.02%. The next day they get back the cash from The Fed plus the interest. The Fed did not get this extra interest from anywhere, it simply 'created' this cash payment. Hopefully that explains in general what is going on Now, here's the irony: US Gov't sells Zero Coupon 1000$ face value bond for 900$ to John, which redeems in 5 years. John is happy, in 5 years he will get 1000$. Government now needs to worry about paying this debt back in five years. Government taxes John and gets 1000$ a year from him. Government spends 800$ on projects, and 200$ is earmarked to pay down debt. After 5 years John has payed 5000$ in taxes, including 1000$ earmarked for debt. The Government then gives this 1000$ back to John to cover their debit obligation. So in essence, John has paid himself the 1000$ and is happy about this To put it into school backyard lingo: Wimpy lends Bully 100$ Wimpy wants 100$ back. Bully beats up Wimpy and takes 100$ from him. Bully gives the 100$ back to wimpy as repayment for the debt. There are a few ways to look at this: 1) John is profiting in the form of a 'tax rebate' in the sense that some of his taxes will come back to him in the form of debt repayment. 2) John should only buy bonds from countries he does not pay taxes into make sure it's not just his own money he is receiving when the bond is redeemed. 3) Since the US Government can easily pay off debt by taking the money from tax payers and giving it back to them (or others who hold the debt) it's a pretty safe investment. The US Bond is backed by the economy of the US, and therefore its ability to repay debt is backed by its ability to tax its economy. Which is why its not generally considered a bad thing to have a large amount of debt, so long as it is well within the realm of reason that the government can pay the obligations through taxes on the economy. Hopefully that makes everything clearish
The US political economy, given its current structure, creates this optical debt. In a way, you can think of it as the whole world lending the US money to be its policeman, fight its wars, etc etc.
Not intended as an answer to OP's Question, just a source of some interesting information Investopedia And some alarming out of control statistics US Debt Clock World Population Artic Sea Ice (CNN)
so you say "It has absolutely nothing to do with political leanings. " shortly after you say "I initially learned some of the mechanics of the US fiat monetary system from hard left liberal." And you know perfectly well that you are playing with words: When I referred to "printing money" I and everyone else in the thread clearly referred to putting money into circulation of the financial system, and not the printing of coins and bills. The US government does not and cannot print as many coins and bills as they like. Maybe it is you who should read up on it.
that is not money creation. It is simply regulations to maintain an orderly market in case of a crash or panic. It simply stipulates how much must be held as reserve, nothing more, nothing less. Those 10k were not created out of thin air. The 9k that you mentioned, are loaned out, are coming from the 10k that was originally deposited. Nothing gets created here. It simply means that the 10k initial deposit is levered up. Bank credit is nothing but a balance sheet item, it is not money in circulation. Think about it for a second: In the end only 7k is freely in circulation unless it gets again deposited in a bank. So, out of the initial 10k only 7k is now available to be invested in productive assets. All else are balance sheet assets and liabilities that cancel each other out. Those assets and liabilities on a bank's balance sheet create nothing, multiply nothing, do nothing. They simply sit there until they are netted out. When a borrower repays the bank the bank in turn lends it out again or reduces its liabilities by returning deposits to creditors it got deposits or loans from.