US Federal Reserve mulls printing more money

[redengin]

The Federal Reserve bank holds large quantities of currency.  The Fed also owns securities and makes loans from which it profits.  There is an awful lot of money available to fulfill demand without having to print more currency.
The Fed uses open market operations to do this.  If the demand for currency increases (bank run) then the Fed offers currency to banks in exchange for securities (treasury notes, bonds, etc.)

The assumption that the Federal Reserve is also the Treasury is the common error.  They are two distinct entities which have different ways to correct the money supply.

That's assuming institutions will buy treasury notes and bonds or will even have the time to do so.  I imagine a modern day bank run (at a national level) could happen in a matter of hours, possibly in a matter of minutes.  If people can't withdraw their funds on the spot, their confidence in the USD will go from 100% to 0% before the teller is able to finish her apology.

What do you believe the motive for a bank run is then?  Aren't people demanding US dollars?  If it gets harder to acquire something in high demand, wouldn't the value go up?  I think you are confusing confidence in the government with confidence in the currency.  Certainly there is a dependency under fiat currency for a strong trusted government, but people should have already priced that into their trust of currency and banking.  Otherwise they would only work for commodities they could take immediate possession of.

[hugolp]

They will default on their promises.  That is why you either want to have your cash in your mattress, or in a very strong bank.

Or, most cynically, put your money in a very weak bank.  If the banks start going down, you want yours to go down first when they're still paying on the 'insurance'.

Default will never ever happen. The USA government will never default on its citizens. It will print away all it needs, which is equivalent to defaulting, but it will never directly default. There is a reason why there has never been a deflationary collapse and the empire collapse are always hyper-inflationary.

The USA would only default on some foreign nation. The event would obviously trigger war, probably IIIWW.

[redengin]

... just credit backed by credit backed by credit that imploded... but don't worry, you'll lose but we'll bail out our Wall St. friends with your children's future. What a system!

This type of stuff is only going to help drive Bitcoin adoption IMO.

Just so we're clear.  The Fed "bailed out" wall street by loaning them funds or buying up equity.  It didn't just give free money to the troubled companies.  We're all still in the same boat floating on the confidence in the US dollar.  Wall street still has to make good on their bail out debt to work our way out of this- and at the rate that its happening it very well could turn a profit for the Fed.  The Fed recently decided to reinvest that profit in the economy, but when the economy gets on its own legs, those profits will go to the treasury and pay off the government debt.  Certainly this will be a painful slow process, but we're no where near a doomsday scenario of internal default.  The only real risk I see is the one hugolp brings up- that other nations may default (PIIGS), which would strain the markets and increase the credit crunch here in the US. 

[nethoncho]

 Wall street still has to make good on their bail out debt to work our way out of this- and at the rate that its happening it very well could turn a profit for the Fed.  The Fed recently decided to reinvest that profit in the economy, but when the economy gets on its own legs, those profits will go to the treasury and pay off the government debt.  

When I was your age, I believed in unicorns also.
Do not think for one minute that any money the fed may get from payments on the bail outs will pay off any debt.

[Anonymous]

The worlds only superpower would just hold everyone ransomn. They might have to nuke a few other countries to get the point across though.

The US government is a mafia organisation,its no surprise Obama is from Chicago.....this is how the mafia rolls.