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The government isn't "printing money" in the sense that this phrase commonly denotes. The government is selling Treasury securities on the open market. The ra

• jhulla 12y ago
  You forgot QE1, QE2, twist, and QE3 where the Fed digitally created $4 trillion and bought up assets. That $4T didn't exist until the Fed conjured it up. Through a middleman, it was handed to the US Treasury.
  • yequalsx 12y ago
    I don't fully understand QE but I believe there is a balance sheet. It's not like money was created out of thin air as such. It did not increase M1. I'm guessing it did increase MB but I don't know. Of course my perception may be completely wrong.
    • nostromo 12y ago
      > It's not like money was created out of thin air as such. No, it was. Literally. The Fed can and does create money and then buy assets with that new money.
    • CyberDildonics 12y ago
      It is the Fed creating money out of thin air buying treasuries and it does increase M1. Here is the fed's own graph of M1. http://research.stlouisfed.org/fred2/series/M1 http://research.stlouisfed.org/fred2/series/M1 You can see where is starts to really skyrocket, which is where 16 trillion was given to the banks in the bailouts (or $53,000 for every person in the USA for scale). This money hasn't even made it into M2 yet.
  • hnnewguy 12y ago
    >until the Fed conjured it up. So in what way would you have money production occur, if not "out of thin air"?
    • msandford 12y ago
      Historically it has been people digging in the dirt to find precious metals and then coining those metals. Worked pretty well for thousands of years and doesn't allow people to counterfeit. If you want money to be a store of value there's no replacement to something that can't be faked. Personally I like the idea of my money holding value but from what I hear that's somewhere between "old fashioned" and "retardedly luddite" these days.
      • hnnewguy 12y ago
        >Worked pretty well for thousands of years and doesn't allow people to counterfeit. Did it really? Perhaps you should refer to the original definition of "debasement". >I like the idea of my money holding value but from what I hear that's somewhere between "old fashioned" and "retardedly luddite" these days. Hah, I wouldn't define it as such, but I do question: why? We live in a capitalist society that benefits from capital being put to work. There are many places you can put your money that will benefit you and others financially.
        • msandford 12y ago
          > Did it really? Perhaps you should refer to the original definition of "debasement". You're right of course. I was speaking in broad generalities rather than specifics. Yes the money was debased. But there was some kind of anchor on value because the dilutions had to be small. From what I remember in history the government didn't go from 99% silver to 1% silver in a single re-issuance of money, it took many reissues over many generations to go from 99% to 50% (or something like that) which actually shows an incredible amount of restraint. I'd be rather pleased if that was the kind of debasement we were seeing in recent history but sadly it isn't. The fact that you had to put SOME metal in the coins was what kept debasing "reasonable" but there are no such restrictions on money creation today. Even if you had to literally PRINT the money the Fed can make $100 bills for a few cents. With computers the marginal cost of creation falls further. There is no restraint save but what those in charge put on themselves. > Hah, I wouldn't define it as such, but I do question: why? We live in a capitalist society that benefits from capital being put to work. There are many places you can put your money that will benefit you and others financially. I agree and I do make efforts to put my money to work for exactly the reasons you've mentioned. I guess it boils down to my idealistic nature; I don't think there should be a "stupidity" tax whereby if you're not savvy enough to understand how finance and compound interest works, your life savings can slowly evaporate. The reason for this in my mind is that everyone has expertise and it's a huge drain on the workings of the world that everyone has to spend who knows how much time every year trying to make sure that their savings don't slowly vanish. I think we would all be better off if people could focus on their field fully rather than having to try and be an expert in both their field and finance.
• nostromo 12y ago
  > The government is selling Treasury securities on the open market... And the Federal Reserve is buying a lot of those treasury securities with printed money.
  • yequalsx 12y ago
    From the FED: " The term "printing money" often refers to a situation in which the central bank is effectively financing the deficit of the federal government on a permanent basis by issuing large amounts of currency. This situation does not exist in the United States." http://www.federalreserve.gov/faqs/money_12853.htm http://www.federalreserve.gov/faqs/money_12853.htm Perhaps they are lying about what is really going on but I think transparency is of primary importance for the functioning of the bond market and I'm assuming they aren't lying.
    • nostromo 12y ago
      The term "permanent basis" is the only part of the statement that prevents it from being a lie. The Federal Reserve does not want to do QE forever. But they have been doing that almost nonstop since 2008.
      • yequalsx 12y ago
        That's what the balance sheet aspect is. There is a due date on the securities purchased by the Fed. Thus there is a time a limit. The Fed does not consider quantitative easing as just printing money. I think if it were just printing money then people would not have faith in Treasury securities and thus the interest rate would be a lot, lot higher than it is now. EDIT: From the link supplied above: "Global demand for Treasury securities has remained strong, and the Treasury has been able to finance large deficits without difficulty. In addition, U.S. currency has expanded at only a moderate pace in recent years, and the Federal Reserve has indicated that it will return its securities holdings to a more normal level over time, as the economy recovers and the current monetary accommodation is unwound."
      • elektronjunge 12y ago
• m52go 12y ago
  > The government is selling Treasury securities on the open market. Right, which the Fed is then buying with the money being printed. Government debt is being monetized by the Fed however you slice it. > Deflation is a bad thing for borrowers. I understand what you're saying, and in theory, it's true. Practically, it's flawed. Why? Because when I'm on a fixed income, I don't care about the value of my money that's going toward paying down debts. I care about the value of the money I have left over. Say I earn $1000 a month. $600 goes to loans. $400 is left over to spend on food. With deflation, sure, that $600 is really worth more than otherwise. But it's a sunk cost to me. That $400 is what matters to me, as a consumer, and with deflation, it buys me more food!
  • dragonwriter 12y ago
    You assume those other numbers a constant with deflation, but they aren't. Because deflation means that $1,000 buts your employer more hours of your labor just as much as it means $400 buys you more food. Double the value of money and, sure, $400 would buy you what used to be $800 of food. But $500 will buy your employer w the equivalent of what used to be $1,000 of your labor (from someone, if not from you), so instead of $400 left after the fixed cost of financing those loans, you'll have a $100 shortfall.
    • m52go 12y ago
      Are you assuming wage decreases? That's a longer-term trend that I don't think we'd see with a shorter-term 3-5 year deflation.
    • sukilot 12y ago
      And this is why currency Economics is so hard. deflation/inflation don't happen uniformly to all dollars and sectors of the economy.