The Motley Fool Discussion Boards
Investment Analysis Clubs / Macro Economic Trends and Risks
|Subject: Re: My friend the jeweler called me||Date: 7/10/2013 10:23 PM|
|Author: warrl||Number: 428428 of 446918|
I would be happy if all the money the Fed is buying assets with was at least backed by debt.
No money the Fed uses is backed by debt.
As soon as it leaves the Fed's hands, it is backed by debt - that is owed to the Fed. (Possible exception: Fed profits handed over to Treasury.)
In fact one can argue that, in effect, the Fed has no money - that money comes into existence when the Fed loans it out, and ceases to exist when it is repaid to the Fed.
(Other banks also do the same thing, but unless they are also central banks they are obligated to have SOME reserves, i.e. a certain fraction of loans they have made. No such requirement has effect on central banks in fiat-currency systems.)
|Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us|