How does new money get into the public money supply and stay there?
I understand that the Federal Reserve (FEDS) controls the money supply and interest rates. Whatever new money enters our economy, it is done through money transfers to member banks who in turn make the new money available to businesses and individuals in the form of loans. But when the loans are paid off, I assume the money then goes back to the FEDS. Therefore, how has new money been entered into the private sector if the new money made a round trip back to the FEDS?
If the Fed buys back issued securities (such as Treasury bills) from large banks and securities dealers, it increases the money supply in the hands of the public. Conversely, the money supply decreases when the Fed sells a security.
In other words, the government issues debt - a treasury note. (We'll make it simple - note is for $1,000 and pays .025% interest rate
A Bank buys that treasury note. In a year, they'll get $1,002.50 from the government. Th banks capital is tied to that note, and it cannot loan money on that note.
When the FED buys that note from the Bank - lets say they pay $1,003 for the note, that increases the money supply - because the bank now has cash that it can loan and has made a profit when it sold the note to the FED.
Similar to money for nothing and your chicks for free.
(Prostitutes and gals that were working at strip clubs suffered financial losses during the great recession, because the bankers stopped going to the clubs and hiring the prostitutes.)
America is great, isn't it?
Do nothing but make a profit by buying from the government, then selling to the FED at a profit.
Not allowed by u.s. citizens, but a con that Mr. Ponzi would have loved
by Jed Fisher 7 years ago
The cause of the slowdown in the global economy is a contraction of the money supply. To create more money, the Federal Government has to print bonds and trade them for dollars printed by the Federal Reserve. The Government has been remiss in this duty for far too long. This has allowed global...
by MikeNV 8 years ago
With all the talk of economic recovery and raising interest rates to keep inflation in check. Sometimes it's pretty easy to get lost in the Turmoil that surrounds the economy.But the question I have is this:Why do we need a Private Group of Bankers manipulating the money supply?There is...
by wacknuts 8 years ago
And what does it mean for us?
by Don A. Hoglund 6 years ago
I know that the government printing money in excess leads to inflation and devaluing the dollar. How does the use by consumers of credit cards have? I personally use very little cash and I hardly know what the money looks like anymore. I put much stuff on a credit card and pay it off monthly. That...
by jerryl 8 years ago
Millions of people do not understand that we have a debt monetary system.The actual creation of money (always) involves the extension of credit by private commercial banks.This means interest bearing loans, so all M1 money in existence is debt. There is never any money created to pay the...
by fishskinfreak2008 9 years ago
These include: BOA, AIG, GM, Chrysler and Citigroup. THIS IS LONG OVERDUE
Copyright © 2018 HubPages Inc. and respective owners. Other product and company names shown may be trademarks of their respective owners. HubPages® is a registered Service Mark of HubPages, Inc. HubPages and Hubbers (authors) may earn revenue on this page based on affiliate relationships and advertisements with partners including Amazon, Google, and others.
|HubPages Device ID||This is used to identify particular browsers or devices when the access the service, and is used for security reasons.|
|Login||This is necessary to sign in to the HubPages Service.|
|HubPages Traffic Pixel||This is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.|
|Remarketing Pixels||We may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.|
|Conversion Tracking Pixels||We may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.|