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The Federal Reserve doesn't print money. The Treasury does that. The Fed does two things: 1. They lend money to banks through what's called their "discount w
by bjt 4y ago
The Federal Reserve doesn't print money. The Treasury does that.
The Fed does two things:
1. They lend money to banks through what's called their "discount window". https://en.wikipedia.org/wiki/Discount_window https://en.wikipedia.org/wiki/Discount_window
2. They buy and sell US Treasury Bonds on the open market until interest rates hit the target that they've set. https://en.wikipedia.org/wiki/Federal_Open_Market_Committee https://en.wikipedia.org/wiki/Federal_Open_Market_Committee
Today's announcement is about using that second mechanism.
- boppo1 4y ago"print money" is a colloquialism for increasing the money supply, which the Fed does do. Before you argue that all banks increase the money supply: there is a limit to the maximum possible amount of money as long as the reserve ratio isn't 0. That maximum limit was raised by the Fed with bond buying. When people complain about printing money, this is what they are complaining about. It absolutely causes asset inflation (very easy to observe with some DCF modeling or checking P/E ratios). I would also argue it is a strong contributor to increasingly binary wealth stratification. It's a legitimate complaint and pedantically pointing out that the Treasury literally prints money is either ill-informed or arguing in bad faith.
- piperswe 4y agoReserve requirement ratios are currently 0: https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm