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Thread: Greenspan: "There is nothing to prevent the government from creating as much money...

  1. #111
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    Dan40's Avatar
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    Quote Originally Posted by JohnfrmCleveland View Post
    The Fed can buy those bonds. Greenspan has already said that the U.S. does not need China or anybody else to buy treasuries, because the Fed can buy them, allowing the government to spend. Governments that are sovereign in their own currency cannot be forced to default on debts denominated in that currency.

    So, yes, the government can create money. And they do, on a regular basis. It's one of the benefits of being a government.
    You are headed in a direction where you could have some validity. But not there.

    The Federal Reserve System is NOT a US Federal Government agency, department, or branch. It follows RULES set by the govt, but is not the govt.

    If you wanted to say the arrangements between the Treasury and the Federal Reserve are a Ponzi scheme or plain BS, I'd agree.

    But the government does not create money. The Federal Reserve buys bonds from the Treasury, which means they are loaning money to the Treasury. And the Federal Reserve has to have collateral for the money they LOAN to the Federal Govt. The Federal Reserves collateral for the money loaned to the US govt? The Treasury Bonds they receive IS the collateral. So that is a round robin of bullshit, and if that was your complaint, I'd agree with you 100%.

    But when you say the US Govt CAN and DOES create money, they do not. They are credited with some amount of money from LENDERS, not just the Federal Reserve Banking System. EVERY nation holds Bonds from the US Treasury. Corporations hold Treasuries. Even individuals hold Treasuries. Those are all LIABILITIES.

    If the government could create money, created money would not have an attached liability. Loans, however spurious some may be, are loans with an attached liability.
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  2. #112
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    Quote Originally Posted by Dan40 View Post
    You are headed in a direction where you could have some validity. But not there.

    The Federal Reserve System is NOT a US Federal Government agency, department, or branch. It follows RULES set by the govt, but is not the govt.

    If you wanted to say the arrangements between the Treasury and the Federal Reserve are a Ponzi scheme or plain BS, I'd agree.

    But the government does not create money. The Federal Reserve buys bonds from the Treasury, which means they are loaning money to the Treasury. And the Federal Reserve has to have collateral for the money they LOAN to the Federal Govt. The Federal Reserves collateral for the money loaned to the US govt? The Treasury Bonds they receive IS the collateral. So that is a round robin of bullshit, and if that was your complaint, I'd agree with you 100%.

    But when you say the US Govt CAN and DOES create money, they do not. They are credited with some amount of money from LENDERS, not just the Federal Reserve Banking System. EVERY nation holds Bonds from the US Treasury. Corporations hold Treasuries. Even individuals hold Treasuries. Those are all LIABILITIES.

    If the government could create money, created money would not have an attached liability. Loans, however spurious some may be, are loans with an attached liability.
    When banks create money, the liabilities remain in the private sector until the loan is repaid; then, they are extinguished. When the government creates money, the liabilities remain with the government until they are extinguished by taxation; but unlike banks, the government can simply hold those liabilities as long as they wish.

    We know that the government creates money because when they issue bonds and spend, it adds net financial assets to the private sector. Treasuries are assets to bondholders and a liability to the government - but the liability is illusory, because it never needs to be extinguished.

    If you insist on saying that the Fed is not an arm of the government, that's fine, but the Fed acts and operates like a prototypical central bank. And what you call a "round robin of bullshit" just happens to be the way central banks operate. I don't know what you consider "normal" or less of a Ponzi scheme, but this is money, and it works very well. Bond issuance was easier to understand during the gold standard years, because it was necessary, and because the Fed couldn't buy Treasuries they way they can today. But the bottom line is that governments with fiat currencies can and do create and spend their own money. One only needs to follow the accounting to see this.

  3. #113
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    Quote Originally Posted by JohnfrmCleveland View Post
    but this is money, and it works very well.
    as long as we can strong arm the world and kick every country's ass that tries to function outside the SWIFT system.
    And why should they not try, as they are being defrauded by dollar printing.
    Last edited by squidward; 03-12-2016 at 10:14 PM.
    If an asset that the government can get for nothing capital is essential to producing assets that command prices consumption goods then you would be wise to search for a sleight-of-hand operation.

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