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I am skipping the digression about whether "printing money" should taken literally to mean the actions of the actions of the Mint/Bureau of Engraving as opposed
by HWR_14 4y ago
I am skipping the digression about whether "printing money" should taken literally to mean the actions of the actions of the Mint/Bureau of Engraving as opposed to the controlling the monetary base.
The Fed both controls the rate that commercial banks are charged (via the discount rate, or other rates based on it) to access the discount window and the rules for doing so. Infinite reserves[1] that charge interest when used aren't infinite. They explicitly have to be used to generate more value than the repayment with interest or the banks lose money and go broke.
If I am wrong, please explain how. But I interpreted most of your post a pedantic explanation about how their control of the money supply wasn't direct and instead through controlling other things that then controlled the money supply.
[1] Only, of course, capital requirements limit banks ability to lend.
- CraigJPerry 4y ago>> I am skipping … controlling the monetary base You can’t really do that and hope to have a handle on how money works. If you don’t have a grasp on the meaning of reserves, you’re sunk. What are reserves, how are they created, how are they destroyed and why are they exchanged between banks? If you can answer these then you’re a solid third of the way to fully understanding this space. You’ve talked about controlling the monetary base which makes me think you’ve fallen down the exogenous money hole. While you’re stuck in that alternate reality you won’t be able to accurately describe how banking works. Money, as we experience it today, is endogenous. >> instead through controlling other things that then controlled the money supply. They don’t control most of the money supply, commerical banks do. Capital requirements rein in commercial banks desire to “print” more money into the economy.