They expand their balance sheet. Which equals digital money creation. It would be simlilar to you logging on to your bank account and electronically adding an additional zero to your balance. 1,000 to 10,000 with the stroke of a key. The problem is, it's illegal for us to do it, but legal under the fed powers. The monetary system is basically a game of confidence. People believe that dollars have a value as a medium of exchange, and it is backed up by law and a powerful enforcement mechanism.
But then why would they ever need to sell bonds in the first place? Why not just always "create" money? Or they can only do that sparingly lest people lose confidence in the dollar? Here is a Treasury URL that (supposedly) lists "debt to the penny". Will this debt increase by the amount of the bonds purchased? http://www.treasurydirect.gov/NP/BPDLogin?application=np Thanks, Bettles
I think I'm going to open my own bank. I'm gonna call it Bronks Bank next to a 7-11. Set up a few Dell workstations with Bronks Bank software. My CPU will be my safe... no need to deal with those pesky steel doors, plus it'll be password protected... I think I'll start with 50 mil. Nice round number. But first I'm gonna take out 10 mil for personal and administrative purposes. OK, who wants some cash, I'm open for business...
They are trying so hard to jump start the housing market, today they talked about mortgage rates going as low as 4% after this latest fed announcement, this will of course help the banks but long term what this does to an ever slowing economy is nothing. How many ways can they try to fix this economy, even if they do pump the economy higher with massive liquidity injections its going to just create more problems.
Velocity of money is a consequence of inflation. You don't influence velocity... you see it "as a result of". You print more money to devalue its worth to generate inflation. As people realize more dollars are needed to maintain the same purchasing power, they will move from paper to assets as fast as they can. And the banks will do the same. Thus, increasing the velocity. I live through 2 hyperinflations and what I just described is as real as it gets. Feel free to correct me though.
The Financial Services Committee can't even see the Fed's true balance sheet. You think they have the real thing on their website..........
Soon, in the global race to the bottom, every central bank will be @ 0%; after that it's all a matter of who's most imaginative at coming up with ways to weaken their currencies without causing their economies to implode completely.