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It's a very special trillionaire. One that can create money.

dragontamer 9y ago
No different than the $5000 credit line from your credit card "created money". The Fed creates money supply by manipulating accounts. But it never prints a physical bill. But this practice is almost the same as how your credit card can have $5000, $10,000, or $20,000 credit line created out of thin air.
- fwdpropaganda 9y ago
  Regular consumers and millionaires and billionaires have limits on how much they can borrow. This special trillionaire doesn't (for all practical purposes). My point here is that I don't think your characterization of the FED as just a market participant is very useful, nothing more.
  - dragontamer 9y ago
    The special trillionare has a limit. It can borrow up to the point where people lose confidence. Because the special trillionare's goal is to ensure the stability of the US Monetary system. As soon as they start to threaten the stability of the US Monetary system, then they'd have failed their job. Ultimately, QE is safer than just "printing money", because at the end of the day, the Fed's QE program kept track of every single dollar in the QE account. And it is in the process of paying that money back and ending QE. ------------- Consider the "free-market" alternative to this situation. Tether-coin. Its literally an account made up by some dude that claims to be "similar to USD". The "legitimacy" of QE (and Tether) is in the strength and confidence in the promise to pay back the money. If Tether pays all of the USD back for all of the USDT they issue, then there's nothing wrong with what they did. Similarly, as long as QE is properly paid for over time, then it's not "money created out of thin air". It more accurate to state it as "credit created out of thin air", and "credit that eventually was paid back". There's little reason to trust Tether in their ability to pay things back. (They're failing the sniff test at the moment). But QE is legitimately being paid back by the Fed. And that's the difference. > My point here is that I don't think your characterization of the FED as just a market participant is very useful, nothing more. Under normal circumstances (ignoring QE), the Fed acts just as a normal market participant. But QE hasn't been done for years now. QE is a special case, but it is also a tool that is rarely used.
- jacob019 9y ago
  The fractional reserve banking system has inherent limits as the bank must keep enough reserves in case of a run. But the fed has no inherent limit. Root access to the USD.
- hisabness 9y ago
  the cc company still has reserves, and that ties back to the central bank.
- patrickg_zill 9y ago
  You understand nothing about how the Federal Reserve truly works.
  - dragontamer 9y ago
    I'm not surprised if I get things wrong. But this is primarily a programming discussion forum. I'm certainly no economist, but I enjoy the discussion. I do believe that the "Hacker News" ethos is to try and explain where I'm wrong in an attempt to elevate the conversation.
  - dang 9y ago
    Maybe, but that's no reason to post unsubstantive comments or uncivil swipes to Hacker News, thereby making this place worse. If you know more, the way to reply to a wrong comment is to share some of what you know so the rest of us can learn something.

No different than the $5000 credit line from your credit card "created money". The Fed creates money supply by manipulating accounts. But it never prints a physical bill. But this practice is almost the same as how your credit card can have $5000, $10,000, or $20,000 credit line created out of thin air.

fwdpropaganda 9y ago
Regular consumers and millionaires and billionaires have limits on how much they can borrow. This special trillionaire doesn't (for all practical purposes). My point here is that I don't think your characterization of the FED as just a market participant is very useful, nothing more.
- dragontamer 9y ago
  The special trillionare has a limit. It can borrow up to the point where people lose confidence. Because the special trillionare's goal is to ensure the stability of the US Monetary system. As soon as they start to threaten the stability of the US Monetary system, then they'd have failed their job. Ultimately, QE is safer than just "printing money", because at the end of the day, the Fed's QE program kept track of every single dollar in the QE account. And it is in the process of paying that money back and ending QE. ------------- Consider the "free-market" alternative to this situation. Tether-coin. Its literally an account made up by some dude that claims to be "similar to USD". The "legitimacy" of QE (and Tether) is in the strength and confidence in the promise to pay back the money. If Tether pays all of the USD back for all of the USDT they issue, then there's nothing wrong with what they did. Similarly, as long as QE is properly paid for over time, then it's not "money created out of thin air". It more accurate to state it as "credit created out of thin air", and "credit that eventually was paid back". There's little reason to trust Tether in their ability to pay things back. (They're failing the sniff test at the moment). But QE is legitimately being paid back by the Fed. And that's the difference. > My point here is that I don't think your characterization of the FED as just a market participant is very useful, nothing more. Under normal circumstances (ignoring QE), the Fed acts just as a normal market participant. But QE hasn't been done for years now. QE is a special case, but it is also a tool that is rarely used.
jacob019 9y ago
The fractional reserve banking system has inherent limits as the bank must keep enough reserves in case of a run. But the fed has no inherent limit. Root access to the USD.
hisabness 9y ago
the cc company still has reserves, and that ties back to the central bank.
patrickg_zill 9y ago
You understand nothing about how the Federal Reserve truly works.
- dragontamer 9y ago
  I'm not surprised if I get things wrong. But this is primarily a programming discussion forum. I'm certainly no economist, but I enjoy the discussion. I do believe that the "Hacker News" ethos is to try and explain where I'm wrong in an attempt to elevate the conversation.
- dang 9y ago
  Maybe, but that's no reason to post unsubstantive comments or uncivil swipes to Hacker News, thereby making this place worse. If you know more, the way to reply to a wrong comment is to share some of what you know so the rest of us can learn something.