Unemployment And Economy: Feds Making Money as Usual – US Money Talk News
By
Jeffrey Paulsen on October 11, 2010, 7:06 am
Posted in
Finance News
The Federal Reserve doesn’t really manufacture money in the literal sense. It is mainly an issuance of money via technology. The Federal Reserved takes the U.S. Treasury Bills and transfers money to government accounts. There is now more money in circulation once it is spent. Ordinarily this would cause inflation because there is now more money in circulation. In the future it will. But for now it just pumps money into government bank accounts or any entity the Fed is bailing out.
Good Investments
The money that was created by the Fed for the Treasury is used for expenditures such as, payments for union stimulus jobs and for many other wasteful activities. Included in this are legitimate appropriations like Social Security payouts and defense. The banks too get money from the Fed at near zero rates that they are not lending out.
Why should they? A home or business loan can default. But investing the free money in low interest guaranteed Fed Bills returns a lot of money when huge amounts of debt is purchased. The banks might also invest in other instruments that assure them of easy earnings.
Federal Reserve Bank
The original intent of the Federal Reserve Bank was currency control so inflation would not get out of hand. In addition, they were the lender of last resort. Their job was never to bailout banks and other businesses. These are new times.
The creation of money sounds better when it is called Quantitative Easing. This is the aforementioned process of creating money out of thin air to purchase government or business debt. Eventually inflation catches up with it all. The money invested in government or bank debt crowds out private enterprise money and any creation of jobs is illusory.
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- What Is The Job Of The Federal Reserve?
- Complaints On Banks: Better Business Bureau May Be Of Some Help
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