Thread: What Money Is Being Used To Buy Our Debt

Now, should the Fed fail, then the government is insuring the accounts of the banks that make up the Fed via FDIC, right?

This generates the interesting scinareo that if the government fails, the feds on the hook for the debt, i.e. it becomes worthless, and so they fail. Then the government has to step in and bail them out.

Hmm. Anyone else here seeing the circular logic here? Sounds like the world biggest ponzi scheme to me. Madoff times 1000 or more. Well, yeah, look who's running the Fed? All the banksters from Wall Street. It's musical chairs between the Fed and Wall Street banks, and various administration's cabinet seats.

From what I've been told, the Fed's main income is a charge for each transaction that it clears between 2 different banks. I'd guess that this is the source of it's money, because I don't think that the Fed can actually print money, that's a function of the treasury.

Originally Posted by OldmanDan

Fed’s Holdings of U.S. Gov't Debt Hit Record $1,696,691,000,000; Up 257% Under Obama



Fed

So, the Fed is actually a group of private banks. They control our money supply. It appears they are supplying a good share of the money the government is spending. I am assuming they are buying this debt because no one else will. My question is, what money are they giving the government to spend. Is it private investor money of the people who own the banks that make up the Fed or is it just imaginary money, or is it newly printed fiat currency?

It's real money, it's a number they type into a computer.
What do you think money is?
The FED is "privately owned", because every bank with a national charter has to put a % of it's assets into the FED.
And the "members" get to elect some board members, but most are government appointed.
It's like a private company where the Government appoints the management. It's really part of the government in every practical sense.
And it's a central bank, which means it controls the currency.

Originally Posted by eohrnberger

Now, should the Fed fail, then the government is insuring the accounts of the banks that make up the Fed via FDIC, right?

This generates the interesting scinareo that if the government fails, the feds on the hook for the debt, i.e. it becomes worthless, and so they fail. Then the government has to step in and bail them out.

Hmm. Anyone else here seeing the circular logic here? Sounds like the world biggest ponzi scheme to me. Madoff times 1000 or more. Well, yeah, look who's running the Fed? All the banksters from Wall Street. It's musical chairs between the Fed and Wall Street banks, and various administration's cabinet seats.

From what I've been told, the Fed's main income is a charge for each transaction that it clears between 2 different banks. I'd guess that this is the source of it's money, because I don't think that the Fed can actually print money, that's a function of the treasury.

How is it possible for the FED to fail?
They can just go to a terminal and type an amount they want added to their account, and press the enter key....it's really that simple.

Money, all money, is a consensual mass hallucination......

Originally Posted by goober

How is it possible for the FED to fail?
They can just go to a terminal and type an amount they want added to their account, and press the enter key....it's really that simple.

Money, all money, is a consensual mass hallucination......

Well now that's really reassuring. <sarcasm>

Originally Posted by goober

How is it possible for the FED to fail?
They can just go to a terminal and type an amount they want added to their account, and press the enter key....it's really that simple.

Money, all money, is a consensual mass hallucination......

Our (self-proclaimed) economic expert has spoken!

Originally Posted by tsquare

Our (self-proclaimed) economic expert has spoken!

He may not always be right but he's always sure.

Now, does anyone actually know the answer to my question? Something verifiable an not just an opinion.

Originally Posted by OldmanDan

Now, does anyone actually know the answer to my question? Something verifiable an not just an opinion.

Seriously, you don't know that money is a consensual mass hallucination?

Originally Posted by goober

Seriously, you don't know that money is a consensual mass hallucination?

They don't understand what money really is, when it is backed by nothing more than the full faith and credit of the US govt. You place faith in the value of money because it is made of paper, not a precious metal. We all agree that paper money has intrinsic value and upon this our monetary system rests. In the same way that a carpenter places his faith that an inch in bumfuck america is the same as the inch in poonjab new york. We agree that an inch there is exactly the same as an inch here. This common agreement is what money rests upon.

The confusion arises when you try to equate paper money not backed by gold or silver with money that is backed by rare metals. They are different animals. To back money with rare metals is an old idea that is not needed in a modern civilization, because it has a downside and can inhibit growth, and is only needed when chaos rules over order.

When you use gold or silver or another rare substance to back money, that is still done by consensus of the society that agrees to use it. Money, the measure of wealth is always by consensus, and it doesn't matter what is used to back that money, whether it be a rare resource or just a common consensus of other things, like the faith in the gov't that issues the currency.

What is money really? It is a way to store personal wealth because it is too difficult to store grain, trading goods, and so on, so money is pure convenience. You cannot eat a dollar bill, but you can eat what that bill will buy, or what you can exchange it for. It is also a way to use a symbol for the value that represents something else which makes trading so much easier. It is easier to carry money in a wallet than to truck around a ton of wheat as you seek to trade your surplus in wheat for something else you can use.

And so Goob is correct. It is a consensual mass hallucination, in which we all agree to the hallucination for the betterment of society. If society breaks down completely and money is no longer seen as something that you can depend upon exchanging for the necessities of existence, your grain you have stored will eventualy spoil, rendering you worthless. Money does not spoil.

The value of money is dependent upon a consensus, and since you cannot eat money, or store real wealth(grain, veggies, goods, and so on) money becomes a way in which to store wealth conveniently, for those that have a lot of it. Money is highly advantageous to those humans who have great surpluses and must hoard that, while serving the poorer folks much less. For the poor money is just a convenient manner in which to buy what it takes to exist and is much easier than barter. The rich are much more concerned about money because they have so much of it, and their identities, their self worth depends upon how high that pile of cash is.

To limit the supply of money to the amount of gold a nation holds is primitive thinking. We have moved beyond this sort of primitive thinking, placing faith in something other than a rare metal. So money is always based upon a consensus, in the same way we all agree that an inch is an inch no matter where you are located. If we want to make an inch longer or shorter, all we have to do is to all agree upon it.

The trouble arises when we confuse money with real wealth, with real wealth being land, food, goods and so on. How we decide to represent that real wealth by using a symbol for it, like paper money is nothing more than a common agreement. Money isn't real wealth, it is a mass hallucination we all agree to as being reality, for convenience. Money is a convenience. Yet we treat it like real, actual wealth. And that is a sort of hallucination.

There will come a day when money will be nothing more than a series of 0s and 1s stored electronically in computers. Hell, its almost that way now. I never carry cash, a debit card represents my cash in a few banks. All it takes for us is to have this thing called faith in our gov't created money that is now in many cases not even a green 20 dollar bill.

When one party or the other tries to destroy that consensual faith, they are playing with fire and apparently don't have enough sense to understand what they are doing. They are acting like money is based upon rare metals when it no longer is. Yet even gold has great value based upon consensus, that is we choose to place value upon it. It just always boils down to consensus whether its gold or the full faith and credit of a gov't that only uses this to back the currency, to give it value.

The vast majority of money is created by banks.
I have $10,000 in cash, that's $10,000 of money supply.

I put $10,000 in the bank, I have $10,000 in my account, the bank lends $9,000.
Now there is $10,000 in my account, $9000 in the borrowers account, and still $10,000 cash in the bank vault.
I can spend $10,000, the borrower can spend $9000, the money supply is $19,000.
No FED involved, this is how banks work, they expand the money supply.
Money is debt, the $19,000 is the $10,000 the bank owes me(the value of my account), and the $9,000 the bank owes the borrower, (the value of his account).
It's backed by the $10,000 cash and the promise of the borrower to repay the loan.
This happens over and over again, debt is money, money is debt.
Federal Reserve Notes count as part of the national debt.
Only the coins are considered money in their own right.

Originally Posted by goober

The vast majority of money is created by banks.
I have $10,000 in cash, that's $10,000 of money supply.

I put $10,000 in the bank, I have $10,000 in my account, the bank lends $9,000.
Now there is $10,000 in my account, $9000 in the borrowers account, and still $10,000 cash in the bank vault.
I can spend $10,000, the borrower can spend $9000, the money supply is $19,000.
No FED involved, this is how banks work, they expand the money supply.
Money is debt, the $19,000 is the $10,000 the bank owes me(the value of my account), and the $9,000 the bank owes the borrower, (the value of his account).
It's backed by the $10,000 cash and the promise of the borrower to repay the loan.
This happens over and over again, debt is money, money is debt.
Federal Reserve Notes count as part of the national debt.
Only the coins are considered money in their own right.

I know what fractional lending is. My question is, does the fed, in the process of buying massive amounts of US debt, actually put additional dollar bills out in the money supply? Is the treasury actually printing more money than it is taking out of circulation?

Originally Posted by OldmanDan

I know what fractional lending is. My question is, does the fed, in the process of buying massive amounts of US debt, actually put additional dollar bills out in the money supply? Is the treasury actually printing more money than it is taking out of circulation?

Somehow that doesn't have a ring of reality to it, so I'd guess "No". I think they are playing computer games, so yes, inventing greater money supply without any sort of assets behind it, substantiating it's value. On that front, I think Goober's comment earlier about mass hallucination may be closer to the mark than not; not that this is anything to take greater comfort in or anything.

So, when China buys a billion dollar T Bill, do they send money or just a computer entry?