Digitizing Money Inflation Changes Nothing - By Pete Kerr (29/7/11) PDF Print E-mail
Pete Kerr   
Friday, 29 July 2011 10:52

In preparing for class this past spring, I encountered a video on the Fed's website that obfuscates the fact that the Fed prints money. The six-minute video (posted in January 2011) features economist Steve Meyer, senior advisor to the Federal Reserve Board of Governors.

In discussing the Fed's most recent expansion, QE2, Meyer states,

You may wonder how the Fed pays for the bonds and other securities it buys. The Fed does not pay with paper money. Instead, the Fed pays the seller's bank using newly created electronic funds, and the bank adds those funds to the seller's account. The seller can spend the funds or can simply leave them in the bank. If the funds stay in the bank, then the bank can increase its lending, purchase more assets, or build up the reserves it holds on deposit at the Fed. More broadly, the Fed's securities purchases increase the total amount of reserves that the banking system keeps at the Fed. Whether the Fed's purchases lead to an increase in the amount of money circulating in the economy depends on what banks do with the new reserves and on what sellers do with the funds they receive. As it happens, the money supply has not grown unusually rapidly since the Fed began its first round of asset purchases. If anything the money supply has been growing more slowly than normal.



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The Small Bank Problem: Why We Are 40,000 Properties Away From Recovery - By Econophile (29/7/11) PDF Print E-mail
Econophile   
Friday, 29 July 2011 10:05

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Is Dodd-Frank Regulation Cutting Off Mortgage Credit? (29/7/11) PDF Print E-mail
Administrator   
Friday, 29 July 2011 10:03

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This Is What A Collapsing Ponzi Scheme Looks Like: Housing Market Headed Off A Cliff As A Shocking 10.8 Million Mortgages At Risk Of Default - By David Degraw (29/7/11) PDF Print E-mail
David Degraw   
Friday, 29 July 2011 09:39

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Greenspan's Fatal Conceit - By Jonathan M. Finegold Catalan (28/7/11) PDF Print E-mail
Jonathan M. Finegold Catalan   
Thursday, 28 July 2011 09:25

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