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The Fed does not create money. Banks create (expand) money by lending. The fed has purchased corporate bonds and swapped them for more liquid securities (treasu
by epa 6y ago
The Fed does not create money. Banks create (expand) money by lending. The fed has purchased corporate bonds and swapped them for more liquid securities (treasury securities/M1). The Fed wants you to think there is inflation, so you get scared and "lock in" your pricing on homes/cars/etc. This activity stimulates the economy.
- rmah 6y agoThat all depends on what you mean by "money". And this is the root of the problem for people not neck deep in the financial system in evaluating metrics about the financial system. This is why there are different numbers for different definitions of "money". M0, MB, M1 M2, etc. Each measures how much "money" there is in the system, but for different definitions of "money". BTW, when the fed lends to banks or purchases bonds, they do, in fact, create money. Just not M0. Depending on where the sellers put the money, you will see an increase in MB, M1 or M2.