4 ms·

Is there some resource I can look up to better understand what you mean by "destroyed"? Will they be absorbing the value back through financial instruments or h

• lmkg 7y ago
  They are loans. Money is given to the banks, and then repaid (with interest, but a low rate and short time makes this marginal). The fact that the money is "created" and "destroyed" is the nature of the Fed. They don't need to have money in order to lend it. That's what the Fed is. These loans are literally the same as printing money, loaning it, collecting the loans, and destroying the printed money. Except everything is just numbers on a balance sheet, so no physical money needs to be physically printed or shredded. The effect is still the same: The Fed decides that money should enter the money system, and also describes how that money will leave the money system.
• nerfhammer 7y ago
  when the fed writes a check to a bank, the money isn't deducted from an account, it's new money created out of thin air. when the fed receives a check from a bank, the money doesn't get deposited and stored in some account, the money just stops existing.
  • zocoi 7y ago
    Any source to back this statement? I’m curious if fed actually destroyed the money after repayment
    • nerfhammer 7y ago
      literally any macroeconomics textbook. it's the whole point of the fed. terms to google: "monetary policy", "open market operations"