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So that say the government says we need $3 trillion in circulation does BEP or the federal reserve just say okay here is $3 trillion bills free money or do they say here is $3 trillion dollars but you have pay debt of money for the $3 trillion I’m printing for you?
They don't actually physically print money off a machine to make more money (Bureau of Engraving....). The Feds increase (or reduce) the money supply by purchasing or selling securities. They also change the federal reserve (interest) rate to loan funds to banks, who in turn loan to consumers. The transactions are mostly digital. The currency printed or minted by the Treasury (different from the Federal Reserve) is not really relevant as almost all high dollar transactions are electronic. Not surprisingly, much of the US currency is held outside the US since in many countries it's the only stable form of currency.
Fiat-currency has no backing other than the government saying, hey, this is money.
So, if the US owes Japan $1.5-trillion....unless both parties agree the debt must be paid back in some other form that is not US-dollars, such as precious-metals, they get dollars for their payment.
Fiat-currency has no backing other than the government saying, hey, this is money.
So, if the US owes Japan $1.5-trillion....unless both parties agree the debt must be paid back in some other form that is not US-dollars, such as precious-metals, they get dollars for their payment.
The US has an endless supply of US-Dollars.
Correct.
But just to add to that, the cost of printing money isn't free. It comes in the form of inflation, which we just witnessed over the past 3 years.
When countries devalue their currencies by printing money, the countries that own their debt get mad. It can lead to a lot of other problems. As a result of Covid policies, a lot of countries around the world issued debt and printed a lot of money. Some countries were worse offenders than others. The U.S. was probably not the worst offender when it comes to running up debt and printing money, but we're definitely among the worst. Other countries are looking for ways to steadily move away from the U.S. dollar as the world's reserve currency, which will likely have negative repercussions for the U.S. economy.
But just to add to that, the cost of printing money isn't free. It comes in the form of inflation, which we just witnessed over the past 3 years.
When countries devalue their currencies by printing money, the countries that own their debt get mad. It can lead to a lot of other problems. As a result of Covid policies, a lot of countries around the world issued debt and printed a lot of money. Some countries were worse offenders than others. The U.S. was probably not the worst offender when it comes to running up debt and printing money, but we're definitely among the worst. Other countries are looking for ways to steadily move away from the U.S. dollar as the world's reserve currency, which will likely have negative repercussions for the U.S. economy.
Not always inflation. Some is dependent on where the new money is placed. As in post 2008 crash QE. Many trillions were created and little to no inflation. Because so much of the new money created remained within the banking system.
And as for Japan, sending newly created USD's overseas causes little internal inflation.
Also the relative global value of currencies is different than internal value change. The USD can significantly inflate internally, yet still remain high or higher in relative global value.
Not always inflation. Some is dependent on where the new money is placed. As in post 2008 crash QE. Many trillions were created and little to no inflation. Because so much of the new money created remained within the banking system.
And as for Japan, sending newly created USD's overseas causes little internal inflation.
Also the relative global value of currencies is different than internal value change. The USD can significantly inflate internally, yet still remain high or higher in relative global value.
We likely would have had deflation in the wake of 2008 (as happened during the Great Depression) instead of the low inflation we got. So in a sense, the money printing caused low inflation instead of deflation. But yes, the money printed went on the balance sheets of the banks. And that also created longer term problems. Now we have "too big to fail" banks. The banking system is concentrated with just a few big banks, which is never a good thing, IMO.
I didn't mention anything about Japan, specifically.
We may be able to inflate for a while, but sooner or later, it will have long term repercussions. But America is a nation that's all about the short term, unfortunately. It's not going to bring good results on a number of different fronts, IMO.
They don't actually physically print money off a machine to make more money (Bureau of Engraving....). The Feds increase (or reduce) the money supply by purchasing or selling securities. They also change the federal reserve (interest) rate to loan funds to banks, who in turn loan to consumers. The transactions are mostly digital. The currency printed or minted by the Treasury (different from the Federal Reserve) is not really relevant as almost all high dollar transactions are electronic. Not surprisingly, much of the US currency is held outside the US since in many countries it's the only stable form of currency.
Read the website again it talking about Bureau of Engraving & Printing not bonds or treasury. They are talking about printing paper money not bonds or treasury or electronic money.
Read the website again it talking about Bureau of Engraving & Printing not bonds or treasury. They are talking about printing paper money not bonds or treasury or electronic money.
Yes I read it...and?
The physical act of printing paper money does not in itself increase debt or create "free money".
But just to add to that, the cost of printing money isn't free. It comes in the form of inflation, which we just witnessed over the past 3 years.
When countries devalue their currencies by printing money, the countries that own their debt get mad. It can lead to a lot of other problems. As a result of Covid policies, a lot of countries around the world issued debt and printed a lot of money. Some countries were worse offenders than others. The U.S. was probably not the worst offender when it comes to running up debt and printing money, but we're definitely among the worst. Other countries are looking for ways to steadily move away from the U.S. dollar as the world's reserve currency, which will likely have negative repercussions for the U.S. economy.
This is why France and some other EU countries are in hot water deficit wise.
In past the French like everyone else could simply "print money" to get themselves out of economic tight spots. Once common currency (the Euro) came along France (nor any other EU member) has that luxury by and large.
Ironically it was the French who pushed creation of the Euro in good part to match French Franc with German Deutschmark. Long the economic powerhouse of Europe Germany was about to get larger (and perhaps economically stronger) with reunification between West and East. Poor France had to do something..
According to one source, only around 3 pct of money supply consists of paper bills and coins. Much of it involves numbers in hard drives.
Also, money is part of a larger credit system consisting of all sorts of financial instruments, with unregulated derivatives (or financial bets made on other financial bets) being the largest.
Finally, much of credit isn't created or even printed out by governments but by commercial banks, and takes place through a money multiplier, i.e., for each loan, new money is created to back it. What's worse is that because banks can borrow from other banks and choose not to follow reserve requirements, then the amount of new money created is much larger.
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