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Old 10-07-2008, 10:13 PM   #1
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Does the Government actually print money?

It seems like people often use the "print out of thin air" as a simplification of a more complex way that essentially boils down to the government printing money. Others have argued that the the goverment doesnt print money and its an oversimplification.

Could someone please describe the actual mechanisms the government uses to control the interest rates? Is the money printed? Is it added to a computer? Are bonds printed? I think this needs to be cleared up.
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Old 10-07-2008, 10:22 PM   #2
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Re: Does the Government actually print money?

Do you actually not know or are you trying to get it more out in the open?
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Old 10-07-2008, 10:27 PM   #3
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Re: Does the Government actually print money?

Generally, it's just shorthand for a far more complex process. Of course, the government does actually print the monetary base.

The real process goes something like this: the Federal Reserve creates reserves (out of the ether) and credits them to the commerical banks' accounts. Then the commercial banks pyramid credit on top of the increased reserves by making loans.
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Old 10-07-2008, 10:33 PM   #4
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Re: Does the Government actually print money?

Quote:
Originally Posted by Borodog View Post
Generally, it's just shorthand for a far more complex process. Of course, the government does actually print the monetary base.

The real process goes something like this: the Federal Reserve creates reserves (out of the ether) and credits them to the commerical banks' accounts. Then the commercial banks pyramid credit on top of the increased reserves by making loans.
Link?
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Old 10-07-2008, 10:40 PM   #5
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Re: Does the Government actually print money?



Quote:
Components of US money supply (currency, M1, M2, and M3) since 1959. In January 2007, the amount of central bank money was $750.5 billion while the amount of commercial bank money (in the M2 supply) was $6.33 trillion. - http://en.wikipedia.org/wiki/Money_supply#Convention
Where did it come from?
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Old 10-07-2008, 10:49 PM   #6
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Re: Does the Government actually print money?

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Originally Posted by superleeds View Post
Link?
Technically the Fed buys government securities from the commercial banks through preferred brokers to inject the increased reserves.

See, for example, http://mises.org/story/2676:

Quote:
The Fed uses what are called open market operations to control the Federal Funds rate, the rate at which large commercial banks lend cash to each other overnight to fulfil their reserve requirements to the Fed. The Fed sets a target for the federal funds rate and defends it by either withdrawing or injecting money according to the requirements of commercial banks. It injects by buying securities from the banks with freshly created checking deposits, or money. This injection increases the reserves commercial banks hold, allowing these banks to expand credit to businesses and consumers. The Fed withdraws money by selling securities to commercial banks and receiving money as payment, thereby reducing reserves and removing credit from the system.

The Fed conducts both temporary open market operations and permanent ones. Permanent, or outright operations, inject cash and remove securities from the banking system forever. The Fed keeps the securities it has acquired outright in the System Open Market Account, aptly initialed SOMA (in Aldous Huxley's Brave New World, the drug soma is produced to keep citizens in a steady state of happiness, much like the Fed's SOMA). Temporary operations, the ones entered into this Friday, involve 114 day repurchase or reverse repurchase agreements whereby the Fed purchases (or sells) securities in return for cash with an agreement that the commercial bank on the other side of the deal will buy back (or sell back) the securities after a period of days.

Temporary reverse repurchase operations, the short-term withdrawal of money from the banking system, are rare. The Fed has only engaged in 16 reverse repos since late 2000, versus 1247 repurchases. This imbalance means that the Fed is almost always augmenting commercial bank reserves by buying securities, allowing the banks to use their larger reserves to expand credit and borrowing. Thus the rate defended by the Fed is lower than the rate at which the commercial banks would be willing to lend each other if the Fed did not exist.
Or just google on something like "Federal Reserve open market operations."
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Old 10-07-2008, 11:13 PM   #7
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Re: Does the Government actually print money?

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Originally Posted by amplify View Post
And how exactly does this show money created out of the ether

Where did it come from?[/QUOTE]

I'll listen to it tomorrow. But to save me another post, LOL.
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Old 10-07-2008, 11:26 PM   #8
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Re: Does the Government actually print money?

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And how exactly does this show money created out of the ether
Is this a joke?
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Old 10-07-2008, 11:44 PM   #9
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Re: Does the Government actually print money?

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Originally Posted by Borodog View Post
Is this a joke?
is that a rebuttal?
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Old 10-07-2008, 11:49 PM   #10
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Re: Does the Government actually print money?

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Originally Posted by amplify View Post
yep

and the green stuff there... yes, sometimes the government literally prints some money but for the most part it's just a metaphor
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Old 10-07-2008, 11:55 PM   #11
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Re: Does the Government actually print money?

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Originally Posted by superleeds View Post
is that a rebuttal?
I was serious. I couldn't tell if you were joking. If you weren't, then yes, the graph illustrates how money is created "from the ether." Its supply is increasing. It is unbacked by any physical commodity. The increase in the supply comes from electronic bookkeeping entries.
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Old 10-07-2008, 11:59 PM   #12
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Re: Does the Government actually print money?

Yes, the Federal Reserve pays the US Treasury a small printing fee to create the physical currency.
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Old 10-08-2008, 12:03 AM   #13
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Re: Does the Government actually print money?

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?
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Old 10-08-2008, 12:05 AM   #14
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Re: Does the Government actually print money?

OP watch this.
http://video.google.com/videoplay?do...74362583451279
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Old 10-08-2008, 12:12 AM   #15
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Re: Does the Government actually print money?

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Originally Posted by Borodog View Post
I was serious. I couldn't tell if you were joking. If you weren't, then yes, the graph illustrates how money is created "from the ether." Its supply is increasing. It is unbacked by any physical commodity. The increase in the supply comes from electronic bookkeeping entries.
It really doesn't. Just because you can't see or touch it all doesn't mean it's not real.
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