Everyone is pretty clear that the Fed creates money by spending it into existance; this is what we all read in Rothbard, etc.
Why is it so difficult to learn the details?
Is there someone in this forum who actually knows these details?
If so, is there something available in the literature section that explains these details?
It is not hard my friend, you dont need a book. But money creation is a divine power, abused as economics is abused. What you need to know is that all money is backed by debt. What seems like debt free money, we pay for it in taxes.
Do reaserch online on the “truth about money creation”. Youtube has some good videos that will get you the idea.
www.youtube.com/watch?v=_dmPchuXIXQ
Let me know if this information was helpful. Have a good day.
Julio, I appreciate your reply.
I imagine that that the answer isn’t “hard,” but then why can nobody answer it directly?
I expect that since the answer is easy, but lengthy, nobody is willing to write out an accurate reply, so I was hoping for some direction.
I have myself asked questions about the details of the shell game, and so have others. I have not read any direct answers, and that’s why I ask “why can nobody answer it directly?”
OK. Lets see. More or less this is how the party goes. The govt needs money, treasury creates bonds, sells it to the Fed at interest, the fed gives the govt the cash it needs (cash printed). Then the fed as it pleases can sell/buy these govt securities in the open market operations to increase the money in circulation or to decrease it.
When the treasury makes payments with this new money, it goes to banks as deposit. Now fractional lending begins.
When banks receive this new money they are only required by law to keep 10% of it(the reserve ratio), the rest they can lend it to whoever they wish. This 90% loaned now goes to another bank that keeps its 10% reserve requirement and lends the rest. Example: govt pays a military supplier 1,000. The supplier deposits it in Bank of America, Bank of America keeps 100 in reserves and loans me the rest, 900 for student loans, my university deposits it in Sun Trust bank. Then Sun trust keeps 90 in reserves and loans 810 to someone else. And the process is repeated until the initial 1,000 becomes 10,000 of new money created out of thin air and backed by debt.
HOPE this helps you.
I don’t think you can get better than Mystery of Banking. That link is to the free PDF.
This is an incredible book that I read too early. I should read again. And again.
Also, go here there’s plenty of sources in there that can tell you about money and the FRS.
The process of credit expansion, once fresh money gets in the hands of the commercial banker, is straighforward (for me, anyway).
It’s the shell game between the Fed, the Treasury and the commercial banker that confuses me still.
Per Tucker’s recommendation below, I will read the Mystery of Banking again, before asking anymore questions. But just a quick look through it and I find that the Treasury sells debt to the commercial banker, not to the Fed, as I think you suggest above.
At any rate, thanks for taking the time.