I agree, And yes I was verbose, but I have found that I needed to explain how money is created as well as the cause of inflation (or one of the cause), even to economic professors. For instance my Econ professor in University. After graduation, I presented him with my paper, and all he could say was I don't understand money. You have done a great job of explaining how the US dollar is valued. I thank you for that.
When you talk of digital dollars held by the Fed. Please elaborate. Do you mean cyber dollars, or Federal Reserve Notes, the majority of which are digital. (Paper money is small change, printed by the Treasury and sold to the Fed for cost of printing, and put into circulation by Federal Reserve regional banks, to faciliate commerce,like vending machines, street corner vendors and drug dealers. I have a$20 note in my wallet for emergencies, it has lain their untouched for years. All of my deposits, all of my transactions are digital, pretty much the same for everyone else. If an employer prints a pay check, it is deposited in a bank or credit union, if the company is big enough, then the deposit is made electronically.
Good question William... The only cash i carry always ends up in the washing machine or dryer...
My guess is that when the FED buys long treasuries from banks they then issue the bank a credit that it can then loan out. That is certainly creating money...
I did massive research in pusuit of MBA, emphasis finance and accounting.
Most of the following is from Federal Reserve Publications like Modern Money Mechanics.
Congress authorizes spending, the President signs it, the Treasury Department then prints T bills and Notes. These then are sold, at discount, the Association of Primary Dealers in Government Securities, at present over 25 members (some minor league come and go), Big ones are Lazard Freres and Goldman Sachs (these are foreign and domestic financial institutions)
The Fed buys it's share from the APDIGS, and then sells them, at a rate established by the Open Market Window, to it's 12 regional banks. Who in turn sells them to member banks, where they are used as the reserve base, for creating money that is a loan.
The reserve base, as authorized by Title 12 USC, is government debt,corporate debt and demand deposits (checking accounts. Corporate bond were never used as a reserve, until Trump.
The reserve base refers to the fractional reserve debt system of the Fed.
The Fed sets the reserve the bank needs to have on hand, before it can loan money
In 1984 it was 10%. Meaning that the bank had to have on hand (or in deposit with the regional Fed) $10 , from which they could loan $100 (creating money out of debt, not thin air as many uninformed state).
When Trump came into office, the financial institutions and corporations were giddy, finally they had a man they could control, so the Fed dropped their pprimary Interest rate to near zero.
Now that less corporate friendly, Democrats are in control, Jerome Powell, appointed by Trump is raising interest rates again.
The excuse is inflation. However that claim is paltering.
Classical inflation is too much money chasing too few goods, or in the vernacular, printing press money like the Germany hyperinflation of 1922.
That is not the case, their is a surfeit of unbought goods, and only third world countries, have printing press money,and they are few and far between.
These is inflation caused by producer shortage and supply chain problems, a recent result of COVID19, and greedy middle men,.and transport companies taking advantage of COVID.
But the main cause of inflation in a fractional reserve economy is the interest that has to be paid on mortgages, credit cards, auto and transporation loans, and corporate and public debt.
Here is how it works in simple form. I live on an island with 10 other people.
I own a barrel of rocks painted gold, which I tell the others is valuable. I also own a printing press which I use to print the local "News of the World".
I print flyers which inform the people that , because of my "gold" I can safely loan them money.
So I loan each $100 at 10% interest. At end of year they owe me $110 or as a community $1100 but there is only $1000 in circulation, there are bad business men,and successful business men,and not all can pay me the $110, so this time I "save" them by having them collateralize.and their debt. and appoint myself sheriff that I can dispossess them,if they don't have the money,
So again I loan them enough money to repay their old debt, at 10% interest. Only this time they are wizened up, and are fearful of being dispossessed (some of them anyway).
So to get ahead of the fame, they raise prices and/or reduce quality and quantity.
By that simple example I hope I have been able to explain how the interest that must be paid on all debts (public and government, especially public. are responsible for "inflation", with one caveat,the role of artificial supply chain problems, and the greed of middlemen and even producers who have found that by raising prices they increase profitability, for what most of America consumes now, even some food items, are discretionary but addictive products, like iPhones or Smartphones or whatever the latest craze and addiction may be.
I agree, And yes I was verbose, but I have found that I needed to explain how money is created as well as the cause of inflation (or one of the cause), even to economic professors. For instance my Econ professor in University. After graduation, I presented him with my paper, and all he could say was I don't understand money. You have done a great job of explaining how the US dollar is valued. I thank you for that.
When you talk of digital dollars held by the Fed. Please elaborate. Do you mean cyber dollars, or Federal Reserve Notes, the majority of which are digital. (Paper money is small change, printed by the Treasury and sold to the Fed for cost of printing, and put into circulation by Federal Reserve regional banks, to faciliate commerce,like vending machines, street corner vendors and drug dealers. I have a$20 note in my wallet for emergencies, it has lain their untouched for years. All of my deposits, all of my transactions are digital, pretty much the same for everyone else. If an employer prints a pay check, it is deposited in a bank or credit union, if the company is big enough, then the deposit is made electronically.
So what is meant by digital?
Good question William... The only cash i carry always ends up in the washing machine or dryer...
My guess is that when the FED buys long treasuries from banks they then issue the bank a credit that it can then loan out. That is certainly creating money...
I did massive research in pusuit of MBA, emphasis finance and accounting.
Most of the following is from Federal Reserve Publications like Modern Money Mechanics.
Congress authorizes spending, the President signs it, the Treasury Department then prints T bills and Notes. These then are sold, at discount, the Association of Primary Dealers in Government Securities, at present over 25 members (some minor league come and go), Big ones are Lazard Freres and Goldman Sachs (these are foreign and domestic financial institutions)
The Fed buys it's share from the APDIGS, and then sells them, at a rate established by the Open Market Window, to it's 12 regional banks. Who in turn sells them to member banks, where they are used as the reserve base, for creating money that is a loan.
The reserve base, as authorized by Title 12 USC, is government debt,corporate debt and demand deposits (checking accounts. Corporate bond were never used as a reserve, until Trump.
The reserve base refers to the fractional reserve debt system of the Fed.
The Fed sets the reserve the bank needs to have on hand, before it can loan money
In 1984 it was 10%. Meaning that the bank had to have on hand (or in deposit with the regional Fed) $10 , from which they could loan $100 (creating money out of debt, not thin air as many uninformed state).
When Trump came into office, the financial institutions and corporations were giddy, finally they had a man they could control, so the Fed dropped their pprimary Interest rate to near zero.
Now that less corporate friendly, Democrats are in control, Jerome Powell, appointed by Trump is raising interest rates again.
The excuse is inflation. However that claim is paltering.
Classical inflation is too much money chasing too few goods, or in the vernacular, printing press money like the Germany hyperinflation of 1922.
That is not the case, their is a surfeit of unbought goods, and only third world countries, have printing press money,and they are few and far between.
These is inflation caused by producer shortage and supply chain problems, a recent result of COVID19, and greedy middle men,.and transport companies taking advantage of COVID.
But the main cause of inflation in a fractional reserve economy is the interest that has to be paid on mortgages, credit cards, auto and transporation loans, and corporate and public debt.
Here is how it works in simple form. I live on an island with 10 other people.
I own a barrel of rocks painted gold, which I tell the others is valuable. I also own a printing press which I use to print the local "News of the World".
I print flyers which inform the people that , because of my "gold" I can safely loan them money.
So I loan each $100 at 10% interest. At end of year they owe me $110 or as a community $1100 but there is only $1000 in circulation, there are bad business men,and successful business men,and not all can pay me the $110, so this time I "save" them by having them collateralize.and their debt. and appoint myself sheriff that I can dispossess them,if they don't have the money,
So again I loan them enough money to repay their old debt, at 10% interest. Only this time they are wizened up, and are fearful of being dispossessed (some of them anyway).
So to get ahead of the fame, they raise prices and/or reduce quality and quantity.
By that simple example I hope I have been able to explain how the interest that must be paid on all debts (public and government, especially public. are responsible for "inflation", with one caveat,the role of artificial supply chain problems, and the greed of middlemen and even producers who have found that by raising prices they increase profitability, for what most of America consumes now, even some food items, are discretionary but addictive products, like iPhones or Smartphones or whatever the latest craze and addiction may be.