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That may very well be. So correct me where I'm wrong here. The Fed prints (or issues) currency, lends it to "the state" at interest. The state eventually pays

• lisper 7y ago
  No, the Fed lends money to banks, not to the state. Banks then in turn lend that money to borrowers who hopefully use it to fund productive activities which produce a profit that allows the loan to be repaid. It is actually a pretty cool system and it generally works very well. Being able to control the money supply as a simple matter of policy rather than, say, relying on the laws of physics to do it for you, is a very powerful economic technology. (But, of course, like any technology, it can be abused.) The state borrows money by issuing bonds which it sells to savers. That money, like all money in a central-bank-based monetary system, ultimately comes from the Fed, but only indirectly. The Fed could loan money to the government directly by buying government bonds directly, but it usually doesn't. Instead, it buys bonds from banks who buy them from the government. See: https://www.thebalance.com/how-is-the-fed-monetizing-debt-3306126 https://www.thebalance.com/how-is-the-fed-monetizing-debt-33... also: https://www.investopedia.com/articles/economics/08/monetary-policy-recession.asp https://www.investopedia.com/articles/economics/08/monetary-...