I’m a little confused with the way capital get injected into the US (world?) economy. The US Treasury prints bonds and puts value onto them, then sells them to investors in exchange for Dollars created by the Fed when they bought bonds from investors. But one way the Fed injects money into the system is that when they buy bonds from investors in exchange for dollars they are injecting money, but when they sell bonds they are taking money out. How does the government pay the interest to the Fed and other bond holders? How do they get the money? And when banks only have to keep 10% of the amount deposited by someone, does the bank electronically create 90% of the cash deposited by that person and lend it into circulation to someone else, and the process repeats? I really don’t understand how this works. And why aren’t we seeing any significant inflation from this?
Capital doesn’t get injected into anything. Capital is real tools, machines, and entire factories that are financed with real savings. Capital can be accumulated by the accumulation of real savings, but it cannot be injected by anybody. The only thing that can be injected is pieces of paper or extra digits in computers.
You have a lot of questions about money and banking. Try this for starters: The Mystery of Banking
The US Treasury counts interest payments to the Federal Reserve also as income.
I’m a little confused with the way capital get injected into the US (world?) economy. The US Treasury prints bonds and puts value onto them, then sells them to investors in exchange for Dollars…
i have often heard the term capital being raised when referring to financial companies. i have heard of capital goods which arent currency or dollars but some type of intermediate good used in industry.
the poster should use a term such as currency or dollars or specify financial capital.
“How does the government pay the interest to the Fed and other bond holders? How do they get the money?”
i have read that the federal reserve makes monetary policy for a govt controlled currency.
the fed may be incorrect in saying they set monetary policy…rather they in league with congress determine an amount of paper and coin currecny to produce and the make laws that many banks (must?) adhere to regarding the services banks perform with the us currency. it does improper to call the current us currency supply a money in a market sense. or any sense.
why dont you write to the federal reserve if you dont know how they truly operate.
Briefly, capital is defined in AE as man made goods that are not consumer goods.
And money.
…that are not consumer goods or money.
And when banks only have to keep 10% of the amount deposited by someone, does the bank electronically create 90%…
i dont know of what you say here is true or not.
“The Depository Institutions Deregulation and Monetary Control Act of 1980 had begun phasing out interest-rate ceilings on deposits and modified reserve requirements in complex ways. Combined with subsequent administrative deregulation under Greenspan through January 1994, these changes left all the financial liabilities that M2 adds to M1 — savings deposits, small time deposits, money market deposit accounts, and retail money market mutual fund shares — utterly free of reserve requirements and allowed banks to reclassify many M1 checking accounts as M2 savings deposits. M2 and the broader measures became quasi-deregulated aggregates with no legal link to the size of the monetary base.[1]”
“And why aren’t we seeing any significant inflation from this?”
monetary inflation or price inflation? many here use the word interchangeably.
What M2 adds to M1 to is not money according to AE. Neither is what M1 adds to MZM.
“Briefly, capital is defined in AE as man made goods that are not consumer goods.”
ok. a rozeff author at lrc mentions capital as a financial instrument..consisting of dollars.
do you exclude that as a proper definition of capital?
perhaps i didnt say it did.
That seems anomalous. Link?
maybe your seem filter is clogged. get it checked.
www.lewrockwell.com rozeff
is m1 money using AE?
My what filter?
is m1 really money in AE??
The aggregates from left to right here begin with the True Money Supply and add more and more extras.
What kind of filter is clogged?