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The Fed "prints" because it is buying mortgage and Treasury assets with magic new currency. Yes, the new cash is being hoarded as bank reserves and it is not i
by watchandwait 17y ago
The Fed "prints" because it is buying mortgage and Treasury assets with magic new currency. Yes, the new cash is being hoarded as bank reserves and it is not in circulation (yet), but you can be sure it is newly printed money.
- cynicalkane 17y agoI'm aware of the expansion of reserves. My objection is twofold: 1) Don't say "printing money". It's not printing money. The Fed does something called printing money, and this ain't it. Don't even say "printing money" in an obtuse metaphorical fashion, since everyone who isn't aware of the current state of the Fed's balance sheet, including many people on HN, will misunderstand. 2) I doubt most of the newly created Federal reserve liabilities will ever see circulation. Remember, the Fed is controlled by people who do not want inflation to happen. Many top economists--notably Volcker, chairman of the Economic Recovery Advisory Board--would rather see a prolonged recession than inflation (cf. http://en.wikipedia.org/wiki/Paul_Volcker#Chairman_of_the_Federal_Reserve http://en.wikipedia.org/wiki/Paul_Volcker#Chairman_of_the_Fe...). Printing money to erase debts would inspire an economic revolt by just about everyone that isn't Congress.