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    Al Farber's Avatar
    Al Farber Posts: 3, Reputation: 1
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    #1

    Dec 6, 2017, 09:16 AM
    Federal Reserve System question?
    All right, so I have a few questions about this video explaining the Federal Reserve. It says a lot of things I don't understand because it uses a lot of economic jargon I don't get. So I was wondering if someone could simplify it for an outsider like me.

    This is how it starts out:

    "Let's say the United States needs money. Instead of issuing their own United States notes backed by their own credit (i.e. gold, silver, etc.), they issue treasury bonds. They then sell these bonds to the Federal Reserve, which buys them with money they created out of thin air."

    But I thought the United States did issue/print their own money through the treasury. And what does it mean when they say the Federal Reserve buys the bonds with money created out of thin air? Do they mean they print money without backing it up with something or that they buy it by writing checks to accounts with no money in them. I've heard conflicting statements saying each. And why is it so looked down upon to print money without backing it up with gold or whatever? I feel like fiat currency would be better because it doesn't limit the money you can produce unlike the gold standard, which is the reason if you print more money it devalues it. I mean printing money must have had to have occurred sometime in the past, otherwise no dollar bills would exist. So why's it so bad when the Fed does it?

    "The money that the fed created then goes to the U.S., the U.S. then pays interest on the money that the Fed lent to the treasury. So to clarify, the Fed creates money from nothing, loans that money to the U.S. and then charges interest on that money. What this means is that there is never and will never be enough money in circulation or existence to pay back that debt."

    Assuming the Fed didn't lend the treasury ALL the money in circulation, I don't get how it's not able to be paid back. I've been able to pay off all my student debt (granted it took a long time) despite the Fed printing more money. Which, I don't get how your loan payment would be increased due to money being printed or devalued... because if it's true that printing more money devalues each dollar, then it would also devalue the loan that was given in the first place.
    talaniman's Avatar
    talaniman Posts: 54,137, Reputation: 10852
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    #2

    Dec 6, 2017, 10:58 AM
    All your assumptions are NOT correct Allen, nor just as simple as your videos make them out to be. Let start with the FACTS, and leave those opinion videos by political DUFUSES alone.

    https://www.federalreserveeducation....-and-functions

    https://www.frbatlanta.org/about/pub...functions.aspx

    Both of these are great reads and should give you a better understanding than the "printing money at will" crap you've been watching. Yes I said it... disregard your videos.
    joypulv's Avatar
    joypulv Posts: 21,593, Reputation: 2941
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    #3

    Dec 7, 2017, 05:31 AM
    There has been an ongoing dispute about the US Federal Reserve for as long as it existed.
    I agree with tal - never assume that any video (or anything period) is truth.
    And don't feel bad if it's difficult to understand... few do. I don't, and I've tried.

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