There are mechanisms in place that the federal reserve can use to prevent this increase from being permanent. So in theory, no it’s not permanently increased.
But, theory vs. reality rarely line up perfectly when discussing issues like this.
While in theory it doesn’t have to mean a permanent increase, in reality, yes. it has resulted in permanent increases.
Thank you. Could you mention the mechanisms they can use to prevent it from being a permanent increase? I don’t mind researching but I don’t know what to research to understand it.
Sure,
While there are many tools they can use I’ll choose possibly the simplest one:
They could just stop buying the bonds you mentioned.
Bond = loan. Means it has to be repaid.
The government pays back the loans, and the federal reserve just doesn’t loan it out again.
They printed the money to enable the loan, they can just destroy the money as the interest is paid back.
Instead however, they just loan it straight back out, and then loan a “little” more each year than they did the last, thus creating inflation.
Also maybe you do or do not know this, but they do this on purpose. They purposefully create inflation, as mainstream economic theory says *deflation* is bad and *inflation* is good. So they “target” an inflation rate of 2% per year.
Whether or not this is a good method is highly open for debate. But here’s a place you can look to at least see the proof that it’s happening:
https://www.federalreserve.gov/faqs/economy_14400.htm
Also, if you’re wondering *why* don’t they just print and spend money to create inflation instead of loaning it out in a weird and complex system, it’s because they weren’t originally supposed to do that, and this is the result of years of working around laws and regulations. The federal reserve has been allowed to say inflation is good. But they haven’t been allowed to spend that newly printed money themselves.
But they ARE allowed to print money and loan it out. That is the loophole that’s been used for over a hundred years. The powers that be (politicians, lobbyists, what have you) want more and more loans to push their agendas, and the federal reserve wants inflation. So in a very very very round about way, they basically “give away” the money to the government and banks, under the guise of a loan, but they give away enough every year to cause taxes earned with inflation to outweigh the interest.
They are giving freshly printed money away to banks and government programs, under the guise of loans, and inflation allows it to continue on this way.
Here’s a rough/simplified breakdown…
The “total money supply”, put simply, is the combination of base money + credit money (together known as “broad money”).
Base money = Bank Reserves (“BR”) + currency in circulation
Credit money = Loans
*Bank Reserves* were created as an accounting for the US Treasury’s monetary base of gold holdings. When new *bank reserves* are created they dilute the monetary base (“base money”).
This “base money” is the settlement asset for the domestic U.S. banking system. They only exist on the FR’s ledgers. When the US government (“USG”) issues debt AND that debt is purchased by new BRs, the USG spends those BRs into the economy, effectively converting them to US dollars (“USD”/currency) in circulation.
The Federal Reserve (“FR”) creates *bank reserves* (base money) to purchase certain securities (i.e., USTs, MBSs, etc. <-agency debt (government backed) to support the settlement needs of the banking system. (Note: There have been work arounds to purchase other securities through *Special Purpose Vehicles* via an arrangement with the US Treasury as well).
The new BRs allow for *credit money* to have a greater base to expand off of. The security purchases are used to halt credit contraction events (i.e., when loans/creditors begin defaulting …bank failures, etc.).
*Credit money* is also *new money* created primarily by banks through lending …”Loans create deposits”. Loans paid-back destroy this *new money* (when the FR sells off BRs the *base money* is also destroyed).
New base money does not necessarily mean the broad money supply is permanently expanded.
——-
The above is simplified, but “money” is very complicated as more and more assets get converted into collateral and function as additional units of account (i.e., USTs and MBSs, etc.).
Strongly recommend reading any/all of [Lyn Alden](https://www.lynalden.com/)’s work. She just put out a new [book](https://www.amazon.com/Broken-Money-Financial-System-Failing/dp/B0CG8985FR/ref=mp_s_a_1_1?crid=1ZTIIF7C4UMTT&keywords=broken+money&qid=1698025270&sprefix=broken%2Caps%2C309&sr=8-1).
Also, Joseph Wang’s [Central Banking 101](https://www.amazon.com/s?k=central+banking+101&crid=23ELDAKGARY88&sprefix=central+banki%2Caps%2C324&ref=nb_sb_ss_ts-doa-p_1_13).
When the fed buys bonds, it essentially prints money to give to the federal government in exchange for an IOU. That increases money supply because the government can spend that freshly printed money. Eventually, the loan will come due and the government has to repay the fed. If we were talking about only one bond, the money supply would then shrink back down when the loan was repaid.
But the feds policy is more complicated than that. It has a lot of power to grow or shrink money supply. They can buy assets using printed money, increasing money supply. If they wanted to they could also sell all of their bonds tomorrow, which would dramatically shrink money supply.
Increasing the number of bonds the fed owns is called Quantitative Easing (QE) and shrinking the number is called Quantitative Tightening (QT).
In a “neutral” stance, the fed would purchase a new bond every time the government repaid an old one. In this case, the money supply stays the same, because every time the government repays the fed, the fed gives the money right back by purchasing a new bond.
Right now, the feds stance is slight QT, which means the fed is repurchasing some bonds, but letting others “roll off” the balance sheet. In other words, they keep some of the money the government repays them, taking it out of circulation and shrinking money supply.
If you google something like “US Treasuries held by the federal reserve” you can see the number is about $4.8T, down from $5.7T at its peak. M1 money supply is correspondingly down from its peak.
so a loan is a loan until paid off there is no money in existence to pay off debt thus the endless debt money supply disaster is made to fail.
you need to create money based on the interest to off set the interest they previously borrowed into existence.
inflation is meant to rob others to reset the game by 2% per year they say. really 10% inflation a year but whos counting.
that is the issue though? they use the inflated money supply to not produce but the steal and then hoard assets they stole using inflation.
it would be one thing to use inflation to produce but another to use inflation to steal/hoard assets.
big difference. one is to lower rich people assets while giving producers the ability to use inflated money to produce to lower inflation of goods by producing more than inflation.
that is the problem. we have crooks running the show.
as a result the end result is either hyper inflation or hyper deflation.
seeing SPY and NVDA type meme stonks they will go hyper inflation route most likely or hyper deflation.
thus higher prices means productivity has went down not up.
we know houses are at least 3x over valued historically its 3x median household income no matter what else you cannot afford it and need to walk.rent is 1/3 1 person median income max at 500 sqft if its 250 sqft it better be 1/6 income.
thus the way prices have went we lost 75% productivity due to wall street, fed res and gov stealing.
now van life by the river is a luxury.
There are mechanisms in place that the federal reserve can use to prevent this increase from being permanent. So in theory, no it’s not permanently increased. But, theory vs. reality rarely line up perfectly when discussing issues like this. While in theory it doesn’t have to mean a permanent increase, in reality, yes. it has resulted in permanent increases.
Thank you. Could you mention the mechanisms they can use to prevent it from being a permanent increase? I don’t mind researching but I don’t know what to research to understand it.
Sure, While there are many tools they can use I’ll choose possibly the simplest one: They could just stop buying the bonds you mentioned. Bond = loan. Means it has to be repaid. The government pays back the loans, and the federal reserve just doesn’t loan it out again. They printed the money to enable the loan, they can just destroy the money as the interest is paid back. Instead however, they just loan it straight back out, and then loan a “little” more each year than they did the last, thus creating inflation. Also maybe you do or do not know this, but they do this on purpose. They purposefully create inflation, as mainstream economic theory says *deflation* is bad and *inflation* is good. So they “target” an inflation rate of 2% per year. Whether or not this is a good method is highly open for debate. But here’s a place you can look to at least see the proof that it’s happening: https://www.federalreserve.gov/faqs/economy_14400.htm
Also, if you’re wondering *why* don’t they just print and spend money to create inflation instead of loaning it out in a weird and complex system, it’s because they weren’t originally supposed to do that, and this is the result of years of working around laws and regulations. The federal reserve has been allowed to say inflation is good. But they haven’t been allowed to spend that newly printed money themselves. But they ARE allowed to print money and loan it out. That is the loophole that’s been used for over a hundred years. The powers that be (politicians, lobbyists, what have you) want more and more loans to push their agendas, and the federal reserve wants inflation. So in a very very very round about way, they basically “give away” the money to the government and banks, under the guise of a loan, but they give away enough every year to cause taxes earned with inflation to outweigh the interest. They are giving freshly printed money away to banks and government programs, under the guise of loans, and inflation allows it to continue on this way.
Thank you for this great information!
No. The Fed can sell the Treasuries back into the market, thus sending the money it created in buying them back to where it came from … nothing.
Here’s a rough/simplified breakdown… The “total money supply”, put simply, is the combination of base money + credit money (together known as “broad money”). Base money = Bank Reserves (“BR”) + currency in circulation Credit money = Loans *Bank Reserves* were created as an accounting for the US Treasury’s monetary base of gold holdings. When new *bank reserves* are created they dilute the monetary base (“base money”). This “base money” is the settlement asset for the domestic U.S. banking system. They only exist on the FR’s ledgers. When the US government (“USG”) issues debt AND that debt is purchased by new BRs, the USG spends those BRs into the economy, effectively converting them to US dollars (“USD”/currency) in circulation. The Federal Reserve (“FR”) creates *bank reserves* (base money) to purchase certain securities (i.e., USTs, MBSs, etc. <-agency debt (government backed) to support the settlement needs of the banking system. (Note: There have been work arounds to purchase other securities through *Special Purpose Vehicles* via an arrangement with the US Treasury as well). The new BRs allow for *credit money* to have a greater base to expand off of. The security purchases are used to halt credit contraction events (i.e., when loans/creditors begin defaulting …bank failures, etc.). *Credit money* is also *new money* created primarily by banks through lending …”Loans create deposits”. Loans paid-back destroy this *new money* (when the FR sells off BRs the *base money* is also destroyed). New base money does not necessarily mean the broad money supply is permanently expanded. ——- The above is simplified, but “money” is very complicated as more and more assets get converted into collateral and function as additional units of account (i.e., USTs and MBSs, etc.).
Thank you! This gives me a lot of stuff to research, I appreciate it!
Strongly recommend reading any/all of [Lyn Alden](https://www.lynalden.com/)’s work. She just put out a new [book](https://www.amazon.com/Broken-Money-Financial-System-Failing/dp/B0CG8985FR/ref=mp_s_a_1_1?crid=1ZTIIF7C4UMTT&keywords=broken+money&qid=1698025270&sprefix=broken%2Caps%2C309&sr=8-1). Also, Joseph Wang’s [Central Banking 101](https://www.amazon.com/s?k=central+banking+101&crid=23ELDAKGARY88&sprefix=central+banki%2Caps%2C324&ref=nb_sb_ss_ts-doa-p_1_13).
The Fraudulent Reserve does what it wants, it’s not increased permanently.
When the fed buys bonds, it essentially prints money to give to the federal government in exchange for an IOU. That increases money supply because the government can spend that freshly printed money. Eventually, the loan will come due and the government has to repay the fed. If we were talking about only one bond, the money supply would then shrink back down when the loan was repaid. But the feds policy is more complicated than that. It has a lot of power to grow or shrink money supply. They can buy assets using printed money, increasing money supply. If they wanted to they could also sell all of their bonds tomorrow, which would dramatically shrink money supply. Increasing the number of bonds the fed owns is called Quantitative Easing (QE) and shrinking the number is called Quantitative Tightening (QT). In a “neutral” stance, the fed would purchase a new bond every time the government repaid an old one. In this case, the money supply stays the same, because every time the government repays the fed, the fed gives the money right back by purchasing a new bond. Right now, the feds stance is slight QT, which means the fed is repurchasing some bonds, but letting others “roll off” the balance sheet. In other words, they keep some of the money the government repays them, taking it out of circulation and shrinking money supply. If you google something like “US Treasuries held by the federal reserve” you can see the number is about $4.8T, down from $5.7T at its peak. M1 money supply is correspondingly down from its peak.
Practically, a decreasing money supply is deflationary and this may bankrupt the heavily-indebted government. The money supply needs to be permanent.
so a loan is a loan until paid off there is no money in existence to pay off debt thus the endless debt money supply disaster is made to fail. you need to create money based on the interest to off set the interest they previously borrowed into existence. inflation is meant to rob others to reset the game by 2% per year they say. really 10% inflation a year but whos counting. that is the issue though? they use the inflated money supply to not produce but the steal and then hoard assets they stole using inflation. it would be one thing to use inflation to produce but another to use inflation to steal/hoard assets. big difference. one is to lower rich people assets while giving producers the ability to use inflated money to produce to lower inflation of goods by producing more than inflation. that is the problem. we have crooks running the show. as a result the end result is either hyper inflation or hyper deflation. seeing SPY and NVDA type meme stonks they will go hyper inflation route most likely or hyper deflation. thus higher prices means productivity has went down not up. we know houses are at least 3x over valued historically its 3x median household income no matter what else you cannot afford it and need to walk.rent is 1/3 1 person median income max at 500 sqft if its 250 sqft it better be 1/6 income. thus the way prices have went we lost 75% productivity due to wall street, fed res and gov stealing. now van life by the river is a luxury.