6 ms·
No that's what low interest rates does
by wagwang 1y ago
No that's what low interest rates does
- JimmyBuckets 1y agoThis comment seems like a rebuttal which is confusing to me because they are deeply related.
- wagwang 1y agoMaybe, but interest rates among other bad banking practices is how we got here in the first place.
- Printerisreal 1y agoNo that's what PRINTING fiat money does. Low or high interest rates, they print $trillions
- arcticbull 1y agoWho's "they"?
- Printerisreal 1y agoGovernments, CBs and investment banks. "They" do it and work together to print more.
- arcticbull 1y agoIn a centrally banked economy, retail and commercial banks create money when you take out loans. The government doesn't create money except during QE which only happened twice in the US, 2009-2014 and 2020-2021. That's why I was curious what you meant by "they." The Fed has been actively destroying money for the last 4 years.
- Printerisreal 1y agoNow explain why government raise the debt limit? other than allowing printing to get fiat money?
- arcticbull 1y agoAh yeah, that's a common misconception. Deficit spending doesn't create new money. Deficit spending borrows existing money from the population and institutions in exchange for a promise of future government revenues. The Fed does not participate in treasury primary auctions and does not monetize the debt as a means of funding government operations. If you printed new money to pay for the government, you wouldn't have a debt. That's double-counting. Not to mention the debt is twice as large as the entire money supply so what you're suggesting isn't even physically possible. It would be inflationary to simply print new money to finance spending, which is exactly why it's not done. [edit] Also the debt limit is a stupid concept that's likely unconstitutional. Congress authorizes spending, meaningful debate over paying for it by adjusting the debt limit likely falls afoul of the 14th amendment's public debt clause. But yeah I mean the debt limit goes up because the government spends more money than it takes in, so it needs to borrow more each year.
- wagwang 1y agoThe amount of money banks create is determined by the appetite for credit which is determined by the interest rate. The fed has not been actively destroying money, they are at most slowing the rate of the increase of money.
- arcticbull 1y agoThey influence creation of money by adjusting the short-term interest rate which influences the demand for borrowing at commercial and retail banks. It's not that direct or straight-forward though, because they only have control over the short end of the yield curve not the long end. The long end of the yield curve has interest rates defined mostly by inflation expectations. If they dropped rates to 0% overnight it probably wouldn't move the 30Y yield all that much -- it might even raise it because of the expectation lower short-end yields would raise inflation. The Fed doesn't have nearly as much control as folks think. The Fed directly created money during QE and they are directly destroying it during QT. There's a net add, but that's mostly because the economy is growing, which creates new demand for money as expressed by demand for debt. The money supply staying fixed or shrinking is a non-goal anyways. It's irrelevant. What matters is inflation as measured from the change in actual prices.
- wagwang 1y agoEvery dollar that's printed gets multiplied based on the interest rate
- deleted 1y ago[deleted]