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I think they have a weird definition of creating money. Because they did say "The Federal government (through the Treasury) creates still more by issuing bonds
by legolas2412 5y ago
I think they have a weird definition of creating money. Because they did say "The Federal government (through the Treasury) creates still more by issuing bonds to cover deficit spending.". So, they imagine the treasury printing the money, while the bonds are actually an IOU.
This is how I see it. Treasury makes new treasuries, and the Federal reserve buys them (through a bank, but it is a middle man only). Essentially, Federal reserve created money and loaned it to the government, holding the treasuries as IOU. This is further complicated as the Federal reserve is also mandated to give all profits to the treasury. So, essentially, the treasury did not create the money, only got a loan, but its loan payments are going to come back to itself.
I personally find it easier to dispel with the illusion of an independent fed, and just say the government (which includes both fed and treasury) prints money.
- jkhdigital 5y agoYou’re missing a key detail: the Fed returns profits, but not loan principal. If the Fed keeps a T-bill until maturity and doesn’t roll it over, then the Treasury must actually pay the principal so the money is destroyed. It is only if the Fed actually cancels government debt that we could call it outright printing. When the base money is itself an IOU, then debt issued by the privileged party is indeed printing money, albeit money with an expiration date.