I don't want to argue. I'd be happy to discuss these matters further so long as the conversation remains rational, and you avoid attempting to put words in my mouth and quote me directly in context. I wrote this: "When the Treasury does not have enough in its accounts to cover its checks, the Central bank covers them by crediting the Treasury's reserve account. This is the "printing step", and it is the only printing step. The Treasury can only spend in, and the Central bank can only print in, the amount of deficits authorized by Congress. Therefore the Central Bank Does Not Determine How Much New Money Gets Printed! (vide infra) This amount gets determined indirectly by Congress when it decides how much to tax and how much to spend. Only Congress can do this." Most of us would interpret "amount" in the quoted paragraph to mean the nominal amount, as in number of dollars or currency units; not the value or purchasing power of the dollars. It is the Congress, and not the Federal Reserve, that determines the total number of units of outside money in the global economy. What the Federal Reserve does do, via monetary policy, is affect the purchasing power of each unit. The Fed's hands are completely tied, however, when it comes to the total number of units of outside money created. Creation of units of outside money is precisely what is meant by the term "printing". "Printing" is the figurative expression for the creation of new outside money. The term, "Printing", never, correctly, refers to inside money. I heard Ben Bernanke once refer to the swapping at market prices of Bank Reserves for Treasuries, i.e., QE, as "printing." This is, in my opinion, an incorrect use of the term "printing", because the dollars the Fed was depositing in reserve accounts as a part of the QE transaction had, in effect, already been "printed" when the Fed covered a previous overdraft due to Congress having created a deficit. Bernanke did this in response to a media question. I think if he had had more time to think about his answer, he might have answered differently. On the other hand, I understand his need to "keep it simple." In my view, there is only one true "printing" step, and that occurs when the Central Bank covers a net, fiscal-year Treasury overdraft -- there are alternatives to the ways this can be accounted for on the books of the Treasury and Federal Reserve, but they are all equivalent. You wrote: "The federal reserve bank is tasked with either expanding or shrinking the current balance." Were you attempting to attribute this to me? If so, it's a misstatement of anything I wrote. One will not be able to understand much of what I post unless one has a grasp of the concepts of inside and outside money, which I believe may be due to Minsky, but on this I could be mistaken. [see Minsky's scholarly criticism of Keynes in "John Maynard Keynes", Pg. 49, by Hyman P. Minsky; also see "Why Minsky Matters", by L. Randall Wray]. I attempted to explain the difference between outside and inside money in my response to you. but it may not have been enough. One must not confuse the outside money Congress causes to be created via deficit spending with the temporary, inside money created within the economy, often referred to as "credit". The number of units of inside money created is, indeed, influenced by both Federal Reserve Monetary policy and the state of the economy. It is mainly inside money that economists are referring to when they use the broad term "money supply". Fed policy does affect the purchasing power, especially versus other currencies, of both inside and outside money. The Fed can not, however, affect how many units of outside money are present in the economy. That is to say, as I have emphasized before, the Fed does not get to determine how much, i.e., how many units, of new outside money will be "printed". That is a power given only to Congress. Yes, the Fed "prints" this outside money, but only so much as Congress indirectly authorizes. The Fed does have control over how the outside money in the economy is distributed between Bank reserves and Treasuries. Undoubtedly the hardest thing to accept is that there is no national debt, because we are all raised on endless political harangues over our trillions of dollars of "national debt" saddled on future generations that we will never be able to pay off. The truth is that when the Treasury auctions securities it is exchanging bank reserves for an interest paying store of money in the form of Treasuries. Recognition of this is the single most important contribution made to our understanding of strong sovereignty, fiat money by the "modern money economists." The U.S. is not borrowing so much as a penny! Since the U.S. dollar is the World's reserve currency, there is a tremendous demand for Treasuries. Our Central Bank also needs them as a tool for carrying out Monetary policy. Treasury's auctions of securities look so much like borrowing can there be any wonder that nearly everyone believes that the U.S. is borrowing money to spend. Unfortunately, our national misunderstanding of U.S. Treasuries has become so ingrained in us that their true roles, and the true reasons we auction them in amounts matching our deficits, could only be accepted by some if they were to make their own, detailed study of transactions among the Treasury, Central Bank, and Private Sector. But who except a few have both the time and inclination for this!* You may be one who is simply unable to grasp the true nature of Treasury-Central Bank-Economy interactions without doing your own detailed study, which you have not the time for. This would be unfortunate only for you, as you will be doomed to accepting the politico-media version, as most others do. The Economics of money and banking is moving on without you. _________________ *I confess. I had both the time and the inclination (I am retired), and I had the personal guidance of a Rutgers-Harvard trained Ph.D. Economist to correct me whenever I strayed off course.
You are not paying much attention to what others say it seems. I disagreed with one very specific post of yours in which you suggested quite directly that it is government that expands or shrinks the Fed balance sheet. That post was post #18. You are now referencing post #16. Your statements in post #18 remain wrong and misleading. And you seem to have problems to admit when you were wrong. Go back and review what you wrote there. I have pointed it out in detail already so please don't ask me again to explain why I said so.
Thank you. Could you pick out one or two specific statements in my Post #18 that you believe are wrong or misleading and quote them directly from that post. I just now re-read post #18 and I didn't see anything that I would want to change other than correct a couple obvious spelling/typos and grammatical errors. I'll be happy to respond. Perhaps I am wrong, but I need your guidance to show me specifically where I am wrong. The Fed "expands or Shrinks" its balance sheet as it sees fit of course, but then today's Fed is a part of the government, it is not, as some here believe, a private for profit bank. The original 1913 legislation that created the Federal Reserve referred to the Fed as "Private" . That was nearly completely undone by Roosevelt's devaluing of the dollar over the vehement objections of the then Fed Chairman and the subsequent Banking legislation that did any undoing that was left to be done. The Fed emerged reincarnated in its present form. The only vestiges of the old fed remain the Branch Banks which have a hybrid structure and dot ".org" net addresses. Today, any net profits made by the Branches, after expenses, which include the dividend (another vestige) fixed by statute and paid to the Fed's private, for profit, bank members, flow right back to the U.S. Treasury; not to the Federal Reserve Member Banks as it would were the Fed privately owned!
I never claimed the Fed to be a private or for profit entity. In fact I stated the opposite, that the Fed is a supposed independent entity that is given a mandate to manage monetary policy to balance the goal of moderate inflation with full employment. It's neither controlled by the administration nor congress or the senate, though it is held accountable and reports to oversight committees. Your statement "but then today's Fed is a part of the government" is plain and simply wrong. What you see something seem to be is not the same as facts. It does not raise or lower interest rates nor manages its balance sheet as a function of what anyone in the administration wants or wishes for. There are countless instances during the past 3 or 4 administrations where Fed decisions were directly opposed to what the administration demanded. In an ideal world politicians or bureaucrats are not even supposed to comment on any imminent Fed decisions not to make their wishes known before important Fed decisions. In extraordinary times and situations the house tasks and bestows the Fed with additional privileges in order to address important matters that threaten the economy. But during normal times there is a clear separation of concerns. What you want to see or how you interpret laws and mandates is entirely your choice but does not mean anything in the grand scheme of things.
Thanks for your response. I'm fine with your position on the fed, and I don't mind that you don't think the fed is part of the government. I'm just pleased you recognize that the fed is not a private for profit institution. But It seems you've left the fed hanging. If it is not private and it is not government, I wonder what you think it is? (By the way, the Fed, on their website weighs in on this very question.) You must have come across some of the same screwball posts I have, where folks are convinced the Fed is a private for profit bank! I find those posts quite entertaining. I was hoping you'd quote specific statements from my from my post #18 that you regard as incorrect so I could give you a specific response. I'm particularly interested in that part of my post #18 where I "...suggested quite directly that it is government that expands or shrinks the Fed balance sheet." I looked for it, but was not able to find it. That's the part I think I could clear up for you. If you can find it for me and quote the whole sentence exactly as i posted it, I'd be much obliged.
I just now, figured out what you may be referring to in this earlier post of yours, though i still don' understand why you posted it. Are you trying to suggest that the Administration does not create nor print money??? If you are, that is of course correct. It does not! Only the legislative branch of government can cause new outside money to be created. They do this indirectly when they decide the level of taxation and spending. I thought I had given very strong emphasis on this point because so many incorrectly think it is the Central Bank that decides how much new outside money to create. The Central Bank creates it, but they don't get to decide how much. Fortunately no one thinks it is the administration that decides how much new money to create. That, fortunately is a power that the Constitution does not give the Administrative Branch. And thank goodness for that!
If the Fed is not a for-profit bank, why do they charge interest on the money they lend to the government? An interest-bearing loan is by very definition "for-profit". If I loan you 100K, and ask that you pay me back 100K, that is neutral. If I loan you 100K, and ask that you pay me back 100K + money on top in the form of interest, that is for profit. Yes? No?
Ooooo. Zeitgeist. Was this produced in Russia perhaps. [I should mention that fractional reserve banking is about inside money. What Zeitgeist is about I'm not sure, it is definitely not about reality. Is it supposed to be entertainment perhaps.]