Monday, January 13, 2014

printing money?

The government really doesn’t “print money” in any meaningful sense.  Most of the money in our monetary system exists because banks created it through the loan creation process.  The only money the government really creates is due to the process of notes and coin creation.  These forms of money, however, exist to facilitate the use of bank accounts.  That is, they’re not issued directly to consumers, but rather are distributed through the banking system as bank customers need these forms of money.  The entire concept of the government “printing money” is generally a misportrayal  by the mainstream media.

[I don't get it.  So what this about hyperinflation and precious metals?]

So to "create" money, the government buys bonds (from banks?).  So the government gives cash to banks in exchange for a promise to pay it back with interest.  So where does the cash come from?  Haven't they run out of cash yet to buy bonds with?

So how does inflation occur?  I always thought it was because there was more and more money in circulation, causing the value of money to go down (so prices go up).

I guess not.  But I don't really understand these explanations.  And another one.

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