Printing $....simple answer please.

Discussion in 'Economics' started by Stosh, Feb 13, 2009.

  1. Virtually all money-issuing authorities have this capability. Hell, Chavez in Venezuela can do this.

    What has made the Fed unique - at least until recently - is that it could do it without disrupting the general perceptions on the long term viability of the money - errr - 0% perpetual note. That is an extraordinarily powerful position to occupy...
     
    #21     Feb 13, 2009
  2. That would be the case in a country like Japan, where such a huge chunk of the federal largesse is funded by the internal population. It also used to the be case in the US, before the debt load required enormous lending commitments from overseas.

    With the current and going-forward borrowing needs, we're probably moving from a "bank of mom & dad" world to a "bank of Tony Soprano" world. What is helping right now is that so many other G8 countries are in deep trouble as well, so even if the US looks horrible, it still looks a heck of a lot better than the UK. Think relative wealth, rather than wealth in absolute dollars.

    But someday, possibly soon, we're going to have G7 countries going into default, and if they handle the process well it may pose very significant problems for the US.
     
    #22     Feb 13, 2009
  3. Well they can do this up to a point.. But remember -- the exchange rate and value of the currency is dictated by the action that occurs on the margin. At a certain point, this money moves around and the dollar loses its viability.

    But yes, you basically got this right. Also realize the fed needs to print just to offset productivity increases and population increases, otherwise deflation will set in (discouraging investment and trend growth)... Thus this is where inflation targeting is justified from.
     
    #23     Feb 13, 2009
  4. Stosh

    Stosh

    So, when they provide this service of printing to offset productivity and population increases they are still taking in wealth, just like my altruistic counterfeiter would be doing. And when you throw in the complexity of the flimsy fractional reserve banking system which also creates money, it doesn't inspire much confidence to me. I hope Timothy Geitner understands this stuff!! Seriously, I know he does, but I have my doubts as to the % of politicians that do. They just think money grows on trees. Stosh
     
    #24     Feb 13, 2009
  5. My understanding is that the FED turns the interest (minus operating cost) to treasury. It does not gain any wealth.
     
    #25     Feb 14, 2009
  6. Agreed concerning most politicians likely not understanding how banking and money works. It would be fascinating to see how congress would do on a little 'quiz' of material from this thread. Regardless, I'm happy that the 4th branch of government (Fed) has discretion over these matters, and that it generally is a meritocracy with the most phD's of any govt agency. We all know that is absolutely no guarantee for success, but I'd rather have an MIT phD running the money instead of the countless ignorant buffoons that can refer to their best work as 'Buy American.'
     
    #26     Feb 14, 2009
  7. Shakes Head

    http://www.endthefed.us
     
    #27     Feb 14, 2009
  8. Stosh

    Stosh

    I took Eco 101 over 40 yrs ago. I remember studying and being tested about the fractional reserve system and how the banking system creates money.....but I don't remember ever studying or being taught that the Fed can just print money like a counterfeiter and acquire wealth. It was certainly never on the exam. I always thought that the gov't had to get their funds mainly from taxing, borrowing, and fees. This thread has been an eye opener for me. It sounds like something that should be unconstitutional (and probably is). God help us. Stosh
     
    #28     Feb 14, 2009
  9. BTW, just call a CONGRESSMAN....call Ron Paul's office and ask him what the FED can do. :eek:
     
    #29     Feb 14, 2009
  10. They can, read the Constitution. They just don't. They let the Fed do it.

    Japan is thinking about issuing a new form of money from their government, as well as keeping their central bank notes. Guess that's one way to inflate. I don't quite understand how it's much different than just letting the central bank create more, but I guess in someone's mind it's different.
     
    #30     Feb 14, 2009