Monday, November 17, 2008

"The Fed Just Prints It Up!"


The Federal Reserve does not print our currency. The Bureau of Engraving and Printing does; it's an agency within the Department of the Treasury.

The Bureau of Engraving and Printing prints, among other things, Federal Reserve Notes, and sells them to the Federal Reserve at pennies on the dollar - roughly 4 cents a piece.

The Federal Reserve, however, creates new money electronically, to buy the Federal Reserve Notes and other US Government Securities - each one representing more debt to the US taxpayer.
New money is also created when someone takes out a loan at a commercial bank. When a loan is taken out, they can NEVER simply count out the bills to the person taking out the loan, and give them the green paper. No, no, and again, no. The new electronic money must first be monetized through a checking account. Then, if the person who took the loan chooses, they can buy some of the paper stuff (Federal Reserve Notes) with their new electronic, checkbook, loan money. Those Federal Reserve Notes will represent their new debt.
For example: You can take out a $1,000 loan. The bank creates the new electronic money and deposits it into your account (at 10%, instantly, you owe $1,100). You can now take your checkbook and write out a check for "cash" and buy some Federal Reserve Notes to spend. The Federal Reserve Notes would be "evidence of your debt".

When you spend them out in the economy, some of them might end up in my wallet. Imagine it. Evidence of your debt, in my wallet, that I call money, and that you owe interest on.

We use debt for our money.

We can change that.