Free Republic
Browse · Search
General/Chat
Topics · Post Article

To: ScottfromNJ
Yes it does. Once treasuries are exchanged for FED created new currency that new currency is used to fund government operations and finds it’s way into the economy. It’s called debt monetization.

A few points here...the Fed only purchases Treasury securities from Primary Dealers (select large banks). They do not purchase anything directly from the US government. Therefore, any currency used in the purchase goes to banks - not the government.

A great majority of funds issued from Fed purchases of Primary Dealer securities stays in the Primary Dealer accounts at the Fed. It is not being circulated back in to the economy. This can be very easily seen by looking at Section 8 of the Fed's weekly H.4.1 report, which shows its balance sheet. You can look in the Liabilities area and see that "Term deposits held by depository institutions" is currently sitting at around $2.14 trillion dollars (from the 7/18/13 release).

Debt is "money" in a debt-based economy. "Currency" (both physical and electronic) is what is used to transact business - and is backed by debt.

55 posted on 07/22/2013 8:53:21 PM PDT by politicket (1 1/2 million attended Obama's coronation - only 14 missed work!)
[ Post Reply | Private Reply | To 53 | View Replies ]


To: politicket

“A few points here...the Fed only purchases Treasury securities from Primary Dealers (select large banks). They do not purchase anything directly from the US government. Therefore, any currency used in the purchase goes to banks - not the government.”

The dealer gets a cut, and although the funds may temporarily sit in accounts, the funds are not permanently under the control of the banks. The funds are eventually spent as directed by law by the legislative branch


57 posted on 07/23/2013 6:04:29 AM PDT by ScottfromNJ
[ Post Reply | Private Reply | To 55 | View Replies ]

Free Republic
Browse · Search
General/Chat
Topics · Post Article


FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson