Economics Questions

Re: When the Federal Reserve prints money to loan to banks do they repay?

cret — Thu, 20 May 2010 07:36:17 GMT

does individual a have 1000 diollars to spend??

Re: When the Federal Reserve prints money to loan to banks do they repay?

DD5 — Fri, 14 May 2010 17:23:44 GMT

You mean the fed buys $1000 bond from individual A

Re: When the Federal Reserve prints money to loan to banks do they repay?

Jeremiah Dyke — Fri, 14 May 2010 17:22:21 GMT

Its not really that the fed prints, its the banks themselves. And by print, they mean it is a mere accounting entry that increases the money supply.

The fed sells a $1000 bond to individual A.

individual A deposits it in their bank

individual A believes they have and extra $1000 dollars to spend

The bank loans out $900 (of A's money) to individual B

Individaul B deposits the 900 in their bank

That bank lends out $810 to individual C and so forth.

Re: When the Federal Reserve prints money to loan to banks do they repay?

cret — Fri, 14 May 2010 17:13:28 GMT

i dont know that the fed prints money to loan to banks

a harry browne book excerpt says:

on page 43 of harry browne book how you can profit from the coming devaluation a paragraph claims "In modern practice, then, the govt does not print paper money to casue inflation. It prints paper money in response to the inflation that takes place through the bank's deposit-loan expansion."

an another post in a different thread says:

"So the inflation is two-fold. Firstly, the Fed pushes new reserves into the system via the OMOs in order to try to bring the FFR down. Secondly the commercial banks pyramid loans on the basis of those reserves. So normally if the Fed increases the monetary base (not typically notes and coins but more commonly by increasing the total quantity of reserves in the system held on account with the Fed itself) by 100 billion you might expect an actual expansion of the overall money supply of maybe 1 trillion (in a very simple example)."

http://mises.org/Community/forums/t/7051.aspx?PageIndex=1

the above quote says 'pushes reserves'?? i dont kow if that means loaning.

i have heard of a discount window at the fed but i dont know if it is true or not. it was described a device to lend to banks which if true it would seem that the banks would repay. whether dollars were printed or not i am not sure.

Re: When the Federal Reserve prints money to loan to banks do they repay?

antonioecc — Fri, 14 May 2010 09:55:13 GMT

When the federal reserve prints money to loan to goverment They take the money as a profit just to pay expenses, the rest is given back to goverment, I do not know exactly how it would work when they loan to banks but probably that profit will be part of all they profit to pay expenses and then return to goverment. The FED is a Non profit institution, the reserve banks, the money in the reserve banks, receive a 4% (not exactly sure) of the money that is vault reserved.

When the Federal Reserve prints money to loan to banks do they repay?

Sol Mr — Fri, 14 May 2010 05:47:21 GMT

And is this money absorbed back into the Federal Reserve and destroyed perhaps? Or do they take it as profit? Or do they just profit from the interest?