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«The Fed creates dollars» Exactly what the parent said. The fact it is used to buy TBills is irrelevant: the Fed creates money out of thin air. Period.

by mrb 9y ago

nikcub 9y ago
Replace TBills with gold - is it still being created out of thin air? The point is it’s backed by an asset
- dmichulke 9y ago
  Did the fed dig out the gold nugget? If not, there is now more dollars chasing the same amount of goods. Yes it's still backed but less than before, i.e., devalued.
  - alexasmyths 9y ago
    "Yes it's still backed but less than before, i.e., devalued." No. 1 Trillion in Assets = 1 Trillion in Currency. 1 Trillion + 1 dollar in Assets = 1 Trillion + 1 Dollar in currency. No dilution by the Fed. (Fractional lending notwithstanding - that's another can of worms)
    - dmichulke 9y ago
      You do realize that you are backing a dollar with a dollar? But you cannot eat a dollar or play games on a dollar or drive with it. In and of itself a dollar is just a piece of paper and has an intrinsic value of say 1ct. So adding a paper note to the economy increases the backing by 1ct and the currency by 1$. Adding an iPhone increases the assets by say 100$ (just made that up by taking 500$ cost - 400$ used materials) and leaves the currency as it is. Hmm, now that I think of it: Are you maybe talking about accounting?
b1daly 9y ago
I think the reason the system has evolved this way is because politically it is hard for the treasury to "print" money, even though they have the legal right to. Having the Fed inject money into the system is a dodge, but effectively the same thing. It gets the treasury off the hook, because they can say they are "borrowing" rather than "printing" money. It's unclear to me why this bothers people so much?
alexasmyths 9y ago
"The fact it is used to buy TBills is irrelevant:" Heyzeus its extremely relevant. HNers are having conspiracy issues with this. * Obviously if there is going to be more money in circulation, it needs be 'created' somehow * But that it is traded for a specific asset, which is kept on a balance sheet - and the 'reverse' can be done to pull the currency out of circulation - is * hugely relevant *.

«The Fed creates dollars» Exactly what the parent said. The fact it is used to buy TBills is irrelevant: the Fed creates money out of thin air. Period.

by mrb 9y ago

«The Fed creates dollars» Exactly what the parent said. The fact it is used to buy TBills is irrelevant: the Fed creates money out of thin air. Period.

nikcub 9y ago

Replace TBills with gold - is it still being created out of thin air? The point is it’s backed by an asset

dmichulke 9y ago
Did the fed dig out the gold nugget? If not, there is now more dollars chasing the same amount of goods. Yes it's still backed but less than before, i.e., devalued.
- alexasmyths 9y ago
  "Yes it's still backed but less than before, i.e., devalued." No. 1 Trillion in Assets = 1 Trillion in Currency. 1 Trillion + 1 dollar in Assets = 1 Trillion + 1 Dollar in currency. No dilution by the Fed. (Fractional lending notwithstanding - that's another can of worms)
  - dmichulke 9y ago
    You do realize that you are backing a dollar with a dollar? But you cannot eat a dollar or play games on a dollar or drive with it. In and of itself a dollar is just a piece of paper and has an intrinsic value of say 1ct. So adding a paper note to the economy increases the backing by 1ct and the currency by 1$. Adding an iPhone increases the assets by say 100$ (just made that up by taking 500$ cost - 400$ used materials) and leaves the currency as it is. Hmm, now that I think of it: Are you maybe talking about accounting?

b1daly 9y ago

I think the reason the system has evolved this way is because politically it is hard for the treasury to "print" money, even though they have the legal right to. Having the Fed inject money into the system is a dodge, but effectively the same thing. It gets the treasury off the hook, because they can say they are "borrowing" rather than "printing" money. It's unclear to me why this bothers people so much?

alexasmyths 9y ago

"The fact it is used to buy TBills is irrelevant:" Heyzeus its extremely relevant. HNers are having conspiracy issues with this. * Obviously if there is going to be more money in circulation, it needs be 'created' somehow * But that it is traded for a specific asset, which is kept on a balance sheet - and the 'reverse' can be done to pull the currency out of circulation - is * hugely relevant *.