When the govt “borrows,” it turns green paper ($ in fed accounts it already spent) into yellow paper ($ in different fed accounts aka ‘treasury bonds’). At maturity, the yellow paper is transformed back into green paper by shifting those $ back to the fed accounts they came from.
2018 uzt. 12
And all those $ together are just our net money supply. Nothing scary about the mechanics.
Not enough people understand that “money” and “debt” are NOT two categorically different things. “Money” is debt, and debts can have more or less “money-ness.” Government debts, both currency and Treasury securities, have a lot of “money-ness.”
One cannot buy things (goods and services – G&S) with T-Bills, but only cash, deposits (debit), or creditcards (credit). The only thing one can buy with T-Bills is money, but not G&S. Therefore, although given the rate of interest, T-Bills are very liquid, they lack moneyness
True, but the Fed’s quantitative easing policy has demonstrated that the mix between reserves and securities is of no detectable macro economic consequence. 😉
What is the point of doing this??
It was applicable to our prior gold standard fixed exchange rate policy, but not to our current floating exchange rate policy.
Corporate Welfare for the few. Privatise the profits, socialise the losses.
And when nobody wants the yellow paper but you continue to print the green paper? That’s called “Venezuela”.
It’s the other way around. Creating the green paper creates the demand for the yellow paper: why would you want your savings not to earn interest?