Open market operations is one way that the Fed injects money into the economy; the government creates bonds/debt out of thin air and sells them to the Fed on the open market:
^ That's more than $10 trillion of new money 'borrowed' from the Fed by the government and then injected into the system in just 10 years. $1 trillion per year equates to 10% of the US GDP.
Quantitative easing is different because the Fed went beyond the regular open market operations of just buying government bonds; they also started buying other kinds of assets. After the 2008 crisis, the Fed purchased toxic assets from troubled banks; the same toxic assets which caused the financial crisis. See https://www.csmonitor.com/Business/The-Circle-Bastiat/2010/0...
When the Fed buys securities, they essentially create new money out of thin air. So that's $3.6T of new money.
But that program ended four years ago. Since then the Fed's balance sheet has been gradually shrinking.
Since the program ended, the Fed has sold $0.4T of those securities.
Just like the Fed creates new money when they buy securities, they destroy money when they sell securities.
So for the last four years, the Fed has been destroying money, not creating it.
This has nothing to do with the national debt, or the government selling bonds to finance the budget deficit.
With the exception of the Fed's crisis response (which ended four years ago), the bonds that fund the national debt are held by the general public and as foreign reserves by nations around the world -- not by the Fed creating money.
That's the thing, I don't think it's fair to characterize it that way. Aside from QE, there's no real sign that "massive streams of money" were "dumped in" at all, outside of the three QE rounds. Here's a graph from the FED where the three rounds of QE are highly visible spikes: https://fred.stlouisfed.org/series/BASE
A weird, philosophical skepticism towards fiat currency and an irrational belief in high rates of inflation even without any evidence for it has been a common folk belief amongst goldbugs for decades. (Side note: what's the cryptocurrency equivalent of a goldbug? A bitbug?)
The general mechanism for the FED to influence the money supply is by borrowing and lending money with commercial banks. QE is only really used as a last resort.
If all the money ever created in the US comes from Fed loans (using US dollars which the Fed created out of thin air), then logically, the only way to fully pay back those
loans plus interest is by borrowing more new money from the Fed - This is because no other entity except the Fed has the power to create the USD necessary to cover the interest on the loans it makes.
If the government can keep accumulating debt forever without limits, is it actually debt?
If someone kept loaning you more money every year and they let you use some of the money from your new loan to pay back all of your old loan... and they let you keep doing this forever; is it actually a loan?
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[ 3.1 ms ] story [ 21.7 ms ] threadhttps://www.investopedia.com/terms/o/openmarketoperations.as...
National debt over time chart (from Wikipedia): https://en.wikipedia.org/wiki/National_debt_of_the_United_St...
^ That's more than $10 trillion of new money 'borrowed' from the Fed by the government and then injected into the system in just 10 years. $1 trillion per year equates to 10% of the US GDP.
Quantitative easing is different because the Fed went beyond the regular open market operations of just buying government bonds; they also started buying other kinds of assets. After the 2008 crisis, the Fed purchased toxic assets from troubled banks; the same toxic assets which caused the financial crisis. See https://www.csmonitor.com/Business/The-Circle-Bastiat/2010/0...
It's deceptive to conflate the Fed's response to the 2008 financial crisis with normal non-crisis operations.
It's true that the Fed purchased a lot of securities in response to the crisis.
You can see their balance sheet ballooning from $0.9T to $4.5T here --> https://imgur.com/a/PGthKNj
When the Fed buys securities, they essentially create new money out of thin air. So that's $3.6T of new money.
But that program ended four years ago. Since then the Fed's balance sheet has been gradually shrinking.
Since the program ended, the Fed has sold $0.4T of those securities.
Just like the Fed creates new money when they buy securities, they destroy money when they sell securities.
So for the last four years, the Fed has been destroying money, not creating it.
This has nothing to do with the national debt, or the government selling bonds to finance the budget deficit.
With the exception of the Fed's crisis response (which ended four years ago), the bonds that fund the national debt are held by the general public and as foreign reserves by nations around the world -- not by the Fed creating money.
A weird, philosophical skepticism towards fiat currency and an irrational belief in high rates of inflation even without any evidence for it has been a common folk belief amongst goldbugs for decades. (Side note: what's the cryptocurrency equivalent of a goldbug? A bitbug?)
The general mechanism for the FED to influence the money supply is by borrowing and lending money with commercial banks. QE is only really used as a last resort.
If the government can keep accumulating debt forever without limits, is it actually debt? If someone kept loaning you more money every year and they let you use some of the money from your new loan to pay back all of your old loan... and they let you keep doing this forever; is it actually a loan?