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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 465369  
Subject: Re: My friend the jeweler called me Date: 7/10/2013 11:33 PM
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<it seems that Ben et cie. are conjuring up currency that is not actually authorized dollar-for-dollar by the Treasury as part of the nation's obligations that fall under the debt limit.>

That is correct. The Federal Reserve is independent of the Congress' limitations on government spending. (Deficits in government spending are financed by Treasury debt.)

The Federal Reserve buys many different assets with a combination of capital and money conjured out of thin air. The mandate of the Fed is to manage the money supply, which it does by buying and assets (including Treasury debt, mortgage debt, etc.) to provide or remove cash from the sellers of the debt.

http://research.stlouisfed.org/fred2/series/RSBKCRNS

Note the difference between the slope of the pre-2008 and post-2008 line.

Wendy
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