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Oh please let's keep the MMT and End the Fed theories to reddit. If you think Fed is creating money out of thin air, it's too far from reality and too politica

Oh please let's keep the MMT and End the Fed theories to reddit. If you think Fed is creating money out of thin air, it's too far from reality and too politically coloured for me to convince you otherwise.

dragonwriter 5y ago
> If you think Fed is creating money out of thin air, it's too far from reality and too politically coloured for me to convince you otherwise. The Fed is creating money out of thin air (well, strictly speaking, it's managing, through target interest rates and other levers, the ability of member banks and other actors to do so, but that's the same thing, ultimately.) That is the objective reality. And it's just conventional understanding of monetary policy, not MMT or End the Fed. (MMT points out the further fact that the Congress, by net taxing/spending decisions, also creates money out of thin air, or destroys it, and furthermore that that and it's money supply effects, not the mythical constraints of fiscal balance which are entirely applying concepts that only make sense in terms of a commodity currency whose underlying commodity supply is not ultimately controlled by the government at issue to a fiat currency to which they do not apply—which, really, is all basically conventional economics, but also conventionally ignored in a policy evaluation context because conventional economists don't like the policy conclusions it leads to; End the Fed I won't touch, because I’ve yet to see a clear, coherent, consistent argument in it beyond “Fed bad”.)
missedthecue 5y ago
What? This isn't MMT or conspiracy. Where do you think the Fed gets its money when it grows its balance sheet by $4 trillion in two years? I'm honestly curious, where do you think that money comes from? https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL
- mohanmcgeek 5y ago
  So when you go to the bank and borrow money with either your personal credit or with your house as collateral, is the bank creating money "out of thin air"?
  - missedthecue 5y ago
    They take money from depositors to originate the loan. But I'm not talking about the money multiplier effect of fractional reserve banking. I'm talking about when the US Treasury needs to quickly sell several trillion dollars worth of bonds to fund things like stimulus checks, covid tests, etc..., and the Fed buys most of it (in order to keep interest rates from skyrocketing) they are doing so by creating new money. The fed doesn't have $4 trillion in cash deposits to loan out to the treasury, especially while they are cutting reserve requirements. They do not take that money from someone else. They do not sell a product to get revenue. They mark up the accounts at the Fed and spend trillions of dollars that didn't previously exist on government bonds. The Treasury takes that money and spends it on govt programs. Again, where do you think the Fed gets new cash to buy bonds with?
    - mohanmcgeek 5y ago
      The government is monetizing it's credit just like how you are monetising your personal credit when you take a loan. When normal banks give you loan, do the deposit holders also not "have" the money? The banks create money, just not out of thin air: there's something of equal value exchanged in return

dragonwriter 5y ago

> If you think Fed is creating money out of thin air, it's too far from reality and too politically coloured for me to convince you otherwise. The Fed is creating money out of thin air (well, strictly speaking, it's managing, through target interest rates and other levers, the ability of member banks and other actors to do so, but that's the same thing, ultimately.) That is the objective reality. And it's just conventional understanding of monetary policy, not MMT or End the Fed. (MMT points out the further fact that the Congress, by net taxing/spending decisions, also creates money out of thin air, or destroys it, and furthermore that that and it's money supply effects, not the mythical constraints of fiscal balance which are entirely applying concepts that only make sense in terms of a commodity currency whose underlying commodity supply is not ultimately controlled by the government at issue to a fiat currency to which they do not apply—which, really, is all basically conventional economics, but also conventionally ignored in a policy evaluation context because conventional economists don't like the policy conclusions it leads to; End the Fed I won't touch, because I’ve yet to see a clear, coherent, consistent argument in it beyond “Fed bad”.)

missedthecue 5y ago

What? This isn't MMT or conspiracy. Where do you think the Fed gets its money when it grows its balance sheet by $4 trillion in two years? I'm honestly curious, where do you think that money comes from? https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL

mohanmcgeek 5y ago
So when you go to the bank and borrow money with either your personal credit or with your house as collateral, is the bank creating money "out of thin air"?
- missedthecue 5y ago
  They take money from depositors to originate the loan. But I'm not talking about the money multiplier effect of fractional reserve banking. I'm talking about when the US Treasury needs to quickly sell several trillion dollars worth of bonds to fund things like stimulus checks, covid tests, etc..., and the Fed buys most of it (in order to keep interest rates from skyrocketing) they are doing so by creating new money. The fed doesn't have $4 trillion in cash deposits to loan out to the treasury, especially while they are cutting reserve requirements. They do not take that money from someone else. They do not sell a product to get revenue. They mark up the accounts at the Fed and spend trillions of dollars that didn't previously exist on government bonds. The Treasury takes that money and spends it on govt programs. Again, where do you think the Fed gets new cash to buy bonds with?
  - mohanmcgeek 5y ago
    The government is monetizing it's credit just like how you are monetising your personal credit when you take a loan. When normal banks give you loan, do the deposit holders also not "have" the money? The banks create money, just not out of thin air: there's something of equal value exchanged in return