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These colorful exposés by jaded ex-financial insiders are all the rage, and I'm not saying Wall Street rules/ethics aren't important to talk about, but it's eas

These colorful exposés by jaded ex-financial insiders are all the rage, and I'm not saying Wall Street rules/ethics aren't important to talk about, but it's easy to ignore more fundamental processes. The Fed, with the touch of a keyboard, writes money into existence out of thin air, purchasing securities with it. It amazes me that so few discuss the ethics of where the money comes from in the first place.

lingben 10y ago
> the ethics of where the money comes from not sure what you mean by 'ethics' it is clearly a construct, just like the concept of money in the first place or the idea of democracy or the authority of police, or the constitution, etc as a society we agree on certain things and then live within this framework "power resides where men believe it resides, it is a trick, a shadow on the wall..." https://www.youtube.com/watch?v=FpL6Fwu0wkw https://www.youtube.com/watch?v=FpL6Fwu0wkw
witty_username 10y ago
> The Fed, with the touch of a keyboard, writes money into existence out of thin air, purchasing securities with it. It amazes me that so few discuss the ethics of where the money comes from in the first place. Everybody's money loses value when they print notes. That's where it comes from.
thrwawy20160421 10y ago
I have noticed that any comment on HN that mentions the Fed's money printing gets downvoted to hell quickly
- beat 10y ago
  Funny, I've noticed that most comments about "the Fed's money printing" are ignorant, paranoid nonsense.
- mfringel 10y ago
  So, why do you believe that that's happening? If possible, avoid the words "groupthink", "mob mentality", "sheeple", and their synonyms in your answer.
- thrwawy20160421 10y ago
  Wow, -2, this proves my point...
beat 10y ago
That's not exactly right, to put it mildly. The Fed provides a mechanism to the market to create money by borrowing from the Fed, and repaying at interest. Entities allowed to borrow from the Fed (banks) are strictly regulated. If they think they can make money by investing what they borrow, and it stays within the strict capitalization laws, then they borrow. That grows the money supply. So the Fed doesn't actually "print money". It provides a mechanism for the money supply itself to grow, based on market demand. The prime lending rate sets the cost of that growth - if the economy is growing too fast (too much demand), they increase the prime, increasing the cost to banks and limiting growth. If the economy is shrinking, they reduce the prime, making it cheaper for banks to lend money (and businesses to borrow), stimulating the economy. Economic growth is simply an increase in production relative to inflation. High inflation hurts growth (by eating into profit). Deflation (negative inflation) hurts growth by making it profitable to simply stuff money in a mattress rather than investing. Economists long ago figured out that low but positive inflation is the right place to be. The Fed manipulates the prime to try to keep things there. Questioning the "ethics" of this is questioning the ethics of the very concept of a free market.
heptathorp 10y ago
> The Fed, with the touch of a keyboard, writes money into existence out of thin air, purchasing securities with it. Yup, that's how currency gets into circulation. How else would it?
forgetsusername 10y ago
Not just the Fed; anyone can create "money" out of nothing. Getting others to accept that money is the tricky part. There's nothing unethical about it. How do you suggest money should be created? By wasting labour and capital and polluting the environment to dig it out of the ground? The fact that it's cheap and easy to create (and destroy) according to supply and demand is a benefit.
- breischl 10y ago
  >>... anyone can create "money" out of nothing. Getting others to accept that money is the tricky part. Indeed, especially since creating your own currency is illegal in many (most? all?) countries.

lingben 10y ago

> the ethics of where the money comes from not sure what you mean by 'ethics' it is clearly a construct, just like the concept of money in the first place or the idea of democracy or the authority of police, or the constitution, etc as a society we agree on certain things and then live within this framework "power resides where men believe it resides, it is a trick, a shadow on the wall..." https://www.youtube.com/watch?v=FpL6Fwu0wkw https://www.youtube.com/watch?v=FpL6Fwu0wkw

witty_username 10y ago

> The Fed, with the touch of a keyboard, writes money into existence out of thin air, purchasing securities with it. It amazes me that so few discuss the ethics of where the money comes from in the first place. Everybody's money loses value when they print notes. That's where it comes from.

thrwawy20160421 10y ago

I have noticed that any comment on HN that mentions the Fed's money printing gets downvoted to hell quickly

beat 10y ago
Funny, I've noticed that most comments about "the Fed's money printing" are ignorant, paranoid nonsense.
mfringel 10y ago
So, why do you believe that that's happening? If possible, avoid the words "groupthink", "mob mentality", "sheeple", and their synonyms in your answer.
thrwawy20160421 10y ago
Wow, -2, this proves my point...

beat 10y ago

That's not exactly right, to put it mildly. The Fed provides a mechanism to the market to create money by borrowing from the Fed, and repaying at interest. Entities allowed to borrow from the Fed (banks) are strictly regulated. If they think they can make money by investing what they borrow, and it stays within the strict capitalization laws, then they borrow. That grows the money supply. So the Fed doesn't actually "print money". It provides a mechanism for the money supply itself to grow, based on market demand. The prime lending rate sets the cost of that growth - if the economy is growing too fast (too much demand), they increase the prime, increasing the cost to banks and limiting growth. If the economy is shrinking, they reduce the prime, making it cheaper for banks to lend money (and businesses to borrow), stimulating the economy. Economic growth is simply an increase in production relative to inflation. High inflation hurts growth (by eating into profit). Deflation (negative inflation) hurts growth by making it profitable to simply stuff money in a mattress rather than investing. Economists long ago figured out that low but positive inflation is the right place to be. The Fed manipulates the prime to try to keep things there. Questioning the "ethics" of this is questioning the ethics of the very concept of a free market.

heptathorp 10y ago

> The Fed, with the touch of a keyboard, writes money into existence out of thin air, purchasing securities with it. Yup, that's how currency gets into circulation. How else would it?

forgetsusername 10y ago

Not just the Fed; anyone can create "money" out of nothing. Getting others to accept that money is the tricky part. There's nothing unethical about it. How do you suggest money should be created? By wasting labour and capital and polluting the environment to dig it out of the ground? The fact that it's cheap and easy to create (and destroy) according to supply and demand is a benefit.

breischl 10y ago
>>... anyone can create "money" out of nothing. Getting others to accept that money is the tricky part. Indeed, especially since creating your own currency is illegal in many (most? all?) countries.