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Can the Federal Reserve, at any time, just click a button and digitally add say $1 trillion to their account, and use it to purchase Treasuries, bonds, ETFs, etc.? Basically, can the Fed conjure-up any sum of money at their own whim?
Seems pretty crazy if they actually have that authority. Shouldn't (Is?) Congress be involved in controlling the nation's money supply? I guess as long as they avoid inflation I am fine with the arrangement we have, as most people probably would be.
No, the Fed does not “print” money (not yet anyway). The Fed controls the supply of money to some extent by setting reserve requirements at banks, monetizing debt, and it can control short term interest rates. In 2008 I remember watching Fed Chairman Ben Bernanke testify to Congress. He said that absent any controlling law, he believed the Fed had a wide latitude to intervene in the financial markets — basically daring Congress to stop him. Congress never put any restrictions in place, so today in the Covid crisis we see the Fed acting in extreme fashion.
They can and they will create funny money in unprecedented quantities, while pretending that the funny money has just as much purchasing power as before.
Prepare yourself for the unavoidable currency collapse.
Can the Federal Reserve, at any time, just click a button and digitally add say $1 trillion to their account, and use it to purchase Treasuries, bonds, ETFs, etc.? Basically, can the Fed conjure-up any sum of money at their own whim?
Seems pretty crazy if they actually have that authority. Shouldn't (Is?) Congress be involved in controlling the nation's money supply? I guess as long as they avoid inflation I am fine with the arrangement we have, as most people probably would be.
They can and have created vast amounts of money. Much of which has been temporary, as after the 2008 crash. Many temporary $T's to back up banks all over the world.
But typically they don't conjure up more money at any time than they need to swap dollar for dollar value with debt paper. As in the QE's post 2008 crash.
It can create as much money as it wants until significant inflation begins to erode the value of the dollar. So far that hasn’t happened.
Quote:
The job of actually printing the money that people withdraw from ATMs and banks belongs to the Treasury Department's Bureau of Engraving and Printing (BEP), which designs and manufactures all paper money in the U.S. (The U.S. Mint produces all coins.)
However, the amount of currency printed by the BEP each year is determined by the Fed, which then submits an order to the BEP. The Fed then distributes that currency via armored carrier to its 28 cash offices, which then further distributes it to 8,400 banks, savings and loans and credit unions across the country. For the 2020 fiscal year, the Fed's Board of Governors ordered 5.2 billion Federal Reserve notes—the official name of U.S. currency bills—from the BEP, valued at $146.4 billion.
The Fed can indeed create money "out of thin air." To be more precise, it does so with keystrokes on a computer. This was illustrated with its QE program, also known as open market operations. That's when the Fed buys an asset from a financial institution and pays for it with money it simply creates.
Steve Meyer, a senior advisor to the Fed's Board of Governors, explains how this is done. “You may wonder how the Fed pays for the bonds and other securities it buys," he says. "The Fed does not pay with paper money. Instead, the Fed pays the seller’s bank using newly created electronic funds and the bank adds those funds to the seller’s account.”
No, the Fed does not “print” money (not yet anyway). The Fed controls the supply of money to some extent by setting reserve requirements at banks, monetizing debt, and it can control short term interest rates. In 2008 I remember watching Fed Chairman Ben Bernanke testify to Congress. He said that absent any controlling law, he believed the Fed had a wide latitude to intervene in the financial markets — basically daring Congress to stop him. Congress never put any restrictions in place, so today in the Covid crisis we see the Fed acting in extreme fashion.
Putting the technicality of printing aside, which is technically done by the Treasury, the act of monetizing debt, i.e. US or other bonds, is effectively creating money, as USD, from nowhere.
The money so created by the Fed is entered as a liability on their balance sheet and the bond acquired is entered as an asset. The money created is entered as a credit, or asset on the sellers books where the bond is a liability. Can they do this ad infinitum? Yup.
Or at least until TSHTF.
So far, so good.
(Is there a fingers-crossed emoji in the house?)
Last edited by PamelaIamela; 05-31-2020 at 10:49 PM..
Putting the technicality of printing aside, which is technically done by the Treasury, the act of monetizing debt, i.e. US or other bonds, is effectively creating money, as USD, from nowhere.
The money so created by the Fed is entered as a liability on their balance sheet and the bond acquired is entered as an asset. The money created is entered as a credit, or asset on the sellers books where the bond is a liability. Can they do this ad infinitum? Yup.
Or at least until TSHTF.
So far, so good.
(Is there a fingers-crossed emoji in the house?)
An open-ended “loan” program for “midsized” businesses — run by the frikken Federal Reserve. Unbelievable.
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done by the Treasury, the act of monetizing debt, i.e. US or other bonds, is effectively creating money, as USD, from nowhere.
