Just yesterday a friend of mine said how pleased he was that the Federal Govt was doing something to help teachers with the bill. I said that 1. the bill doesn’t really help teachers and 2. what business is it of the Federal Govt to spend money they do not have to fund this? He said, wow, I never thought of it that way. Duh??
It is actually worse than 36BIL, a lot worse. The states like banks do practice fractional reserve banking in that they issue bonds on money they have coming in. So if the government gives them 36billion then they will take out loans between 5 and 10 times that much. So the Feds really gave states the opportunity to get up to 360 billion in loans. And guess where these loans come from? The Federal Reserve Banks of course. So the Fed gets to create 360 billion on top of the 36 billion by the government thus creating almost 400 billion brand new dollars.
I don’t think it’s the Federal Reserve Banks that will buy these bonds but commercial banks. Much of the money will be deposited in commercial banks enabling them to expand credit and buy State issued bonds.