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The problem with this article's accounting of the Fed, is that it's missing 4.5T in quantitative easing assets that were injected into banks, in crisis, outside
by dv_dt 8y ago
The problem with this article's accounting of the Fed, is that it's missing 4.5T in quantitative easing assets that were injected into banks, in crisis, outside the conventional theory of Fed management.
https://www.thebalance.com/what-is-quantitative-easing-definition-and-explanation-3305881 https://www.thebalance.com/what-is-quantitative-easing-defin...
The other contribution is that fractional reserve lending itself also creates inflationary currency. There is some 22T (IIRC) of private loans. I think the real objection to applying MMT more fundamentally is fear that allowing public programs to focus on good return on investment expenditures without worrying as much about cashflow against direct tax receipts, it takes out "capacity" for private lending to select it's desired investments.
- spiralx 8y agoWell, fractional reserve lending isn't a useful model for how money is created in the modern economy - bank loans are just a matter of adding an amount to the borrower's account balance and are constrained solely by the bank's judgement of the risk of a default and to a lesser extent reserve requirements imposed by law. The amount of money that is deposited in a bank has no effect on its ability to loan money. I'm also not impressed by th6 author's claims about the FED not being audited, which is a trope common amongst a particular subset of the right that to the point it's practically a dog whistle for conspiratorial anti-tax and government types.
- dv_dt 8y agoThe point is that “just adding an amount” to the balance, creates money, temporarily if the lone is repaid, but potentially inflationary as long as the loan is open, and the money is spent and circulating.