Quote:
Originally Posted by Dane S
Is it fair to say that the Fed either prints (including digitally "prints") the money it creates directly or promises to print the money at some time in the future? Is there any other option?
The Fed creates debt. That's all fiat currency is, all your dollar promises to be, good for all debts. This debt is handed to private banks at a low interest rate and they lend it out at a high interest rate. The magic of
fractional reserve banking multiplies this debt and the bank lends out ten times the amount originally handed them. There is no need for anything to be printed. The Fed simply adds an amount to the account of whichever bank.
When the bank lends out ten times the amount of money credited to them, all of it is placed on the books as an asset. How this is an asset I have no idea, since it never existed. Banks project stability with huge marble columns and weasels in expensive suits and huge vaults in order to seem like a place with money where you can be safe. In reality, even the best bank is broke ten times over. If you made $1,000 and lent out $10,000 would you have ten times as much money? No, you'd be bankrupt.