The 10 Planks of the Communist Manifesto

Quote:

Originally Posted by Xiahou

Really? According to this, admittedly simplistic, explanation- it looks like the Fed has pretty absolute control over the amount of currency in circulation. When it wants to create money, it buys bonds- when it wants to make money go away, it sells bonds.

It is hardly a monopoly on money. They help control interest rates, but that in itself is a limited power. It is not forcing banks to do something, it takes an action which it thinks will usually help get to some end. Whenever a bank loans money that is not in its reserves, they are creating money. Money isn't just the paper that you pass around and it isn't just the credit or accounts one has. Money is created when they do that lending. Simply: when people borrow that money and spend it, they are spending money that is neither backed by an account nor backed by physical money. This is why the FDIC makes them keep certain reserves, because a run on the bank is always possible and it is meant to encourage people so that they all don't go running looking for bills that won't be there, and on a big enough scale resulting in economic collapse. Also, I'm sure that many taxpayers would be happy to know that, in this process and not as an end they strive for, the Fed usually makes an incredible amount of money. Basically, I wasn't claiming that the Fed didn't make money, only that they weren't the primary source, by a long shot.