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Author Topic: Theoretically, say a whole ton of people wanted to use Bitcoin  (Read 1823 times)
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November 06, 2013, 06:10:07 PM

I wanted to expand on this a little, as the way the Fed creates money is less nefarious than what "out of thin air" may imply to some readers.

The Fed creates money by buying assets.  Historically, the asset of choice was US Government debt, but assets now include agency debt as well as some more creative stuff, IIRC.  Consider a purchase of US Government debt: the Fed literally credits the Treasury's bank account with $1,000,000 of new USD [that previously never existed]; but remember, in exchange for these new dollars, the Fed now holds on its balance sheet an asset of supposedly* equal value [the US Gov promises to pay those million dollars back in the future].  The Fed can destroy money by doing the opposite: sell some of its assets in exchange for USD [thus sucking USD out of the money supply].

The point I wanted to make is that the Fed's balance sheet is always....balanced.  

Its far, far more nefarious than creating money "out of thin air".

ne·far·i·ous [ nə férree əss ]  
evil: utterly immoral or wicked

Hmm, you're right.  Creating money willy-nilly out of thin air with no accountability would be "brazen," not "nefarious."  Perhaps nefarious is a good adjective for the stealthy process of creating money that I described.

How is creating unpayable debt that is effectively enslaving a country not immoral or wicked?

Didn't I just agree with you?  

I wasn't sure if you were being rhetorical or not.

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