$3.5T Not As Big As You Might Think

[Toddsterpatriot]

But wait...I thought you said the Fed balance sheet was 500 million?

Why do you feel I said any such thing?

 

[basquebromance]

This is a yawp. A tantrum. Not a strategy to pass this thing.

 

[g5000]

But wait...I thought you said the Fed balance sheet was 500 million?

No, he said, "$500 million, on an $8.5 TRILLION balance sheet, is less than a rounding error."

 

[g5000]

https://www.cato.org/publications/commentary/how-federal-reserve-literally-makes-money

Here they are are talking about 2 Trillion. Not 500 million.

Not all of that 2 trillion is going to banks.

The first paragraph in your link:

The Federal Reserve has vowed to provide up to US$2.3 trillion in lending to support households, employers, financial markets and state and local governments struggling as a result of the coronavirus and corresponding stay‐at‐home orders.

 

[Lesh]

No, he said, "$500 million, on an $8.5 TRILLION balance sheet, is less than a rounding error."

So the Fed has 8.5 trillion lent to banks

And with fractional accounting those banks can leverage that 8.5 to lend far more ( in essence creating money on their own). When I borrow $400,000 to buy my house...did that bank "find" that money and lend it to me?

Nope. They created most of it out of thin air. Their concern is the interest I will pay on that "thin air money".

Every penny of principal I pay back LOWERS the amount of money they can lend out to other people because it goes "poof" on the books

 

[Toddsterpatriot]

So the Fed has 8.5 trillion lent to banks

And with fractional accounting those banks can leverage that 8.5 to lend far more ( in essence creating money on their own). When I borrow $400,000 to buy my house...did that bank "find" that money and lend it to me?

Nope. They created most of it out of thin air. Their concern is the interest I will pay on that "thin air money".

Every penny of principal I pay back LOWERS the amount of money they can lend out to other people because it goes "poof" on the books

So the Fed has 8.5 trillion lent to banks

Nope. Not even close.

 

[Lesh]

But back to the subject...that $378B in interest we pay on the Debt is pretty small. We don't pay the principal ever, Banks would freak out if we did because it removes money from the system

And they did just that in 2000.

 

[g5000]

Lesh, we need to back up here. Here is where you went off the rails.

Toddster asked you this:

If the Treasury paid off my $10,000 T-Bill, how is that money removed from the economy?

You replied:

Yes


You have zero understanding of how the Fed works.

The Fed creates money out of thin air and then lends that money out. They lend it to banks at very low interest rates but very large amounts of money. Those banks that receive those loans then lend that money at somewhat higher rates. Those banks lend that money to YOU for mortgages or car loans or business loans or whatever.

When you pay those loans back they go ....poof. they go back to thin air.

Toddster asked about getting his money paid back for a Treasury bill. You then responded by talking about the Fed. The Fed and the Treasury are two entirely separate entities.

If Toddster has $1000 cash, he can buy a Treasury bill for that amount. He gets paid interest on that $1000 he loaned to the government, and at the maturity of that bond, he gets paid back the principal of $1000. That cash he loaned is paid back to him and he can put it back into the economy any way he wishes.

It does not disappear. Because it was not created out of thin air. It came from Toddster's earnings.

That's $1000 he bought the T-bill with is the money used to cover our federal debt.

That's how paying off the federal debt would work. All those trillions of dollars loaned to the Treasury would go back into the economy. Some would leave the country and go back to the foreign investors from where the money originated.

 

[Toddsterpatriot]

So the Fed has 8.5 trillion lent to banks

And with fractional accounting those banks can leverage that 8.5 to lend far more ( in essence creating money on their own). When I borrow $400,000 to buy my house...did that bank "find" that money and lend it to me?

Nope. They created most of it out of thin air. Their concern is the interest I will pay on that "thin air money".

Every penny of principal I pay back LOWERS the amount of money they can lend out to other people because it goes "poof" on the books

When I borrow $400,000 to buy my house...did that bank "find" that money and lend it to me?

Every loan is fully funded. They either had deposits, or borrowed from another bank.

Every penny of principal I pay back LOWERS the amount of money they can lend out to other people

If you pay back $1000, they can't loan that $1000 to the next guy? LOL!

 

[Lesh]

Our national debt still carries the full cost of WWII. All of it.

It doesn't mean much because 60 years of inflation has rendered it irrelevant

 

[Lesh]

Toddster asked about getting his money paid back for a Treasury bill. You then responded by talking about the Fed. The Fed and the Treasury are two entirely separate entities.

Nonsense. The Fed is where that money originally came from.

 

[g5000]

But back to the subject...that $378B in interest we pay on the Debt is pretty small. We don't pay the principal ever, Banks would freak out if we did because it removes money from the system

And they did just that in 2000.

A small piece of that interest we pay would go to Toddster for buying that $1000 T-bill. And he could then spend it on hookers and blow.

Eventually, he gets his thousand dollars back, too, and he can return it to the economy by purchasing another T-bill or spend it on botox since he'll be 30 years older by then.

 

[Lesh]

Every loan is fully funded. They either had deposits, or borrowed from another bank.

Exactly. Who borrowed from another bank who borrowed from the Fed...who created it out of thin air...and will return it to the ether when it's repaid

 

[g5000]

Nonsense. The Fed is where that money originally came from.

Nope. It came from Toddster's pocket and that is where it will go back to. It won't go poof!

The Treasury prints actual money, you know.

 

[Lesh]

And to top that off with ":fractional reserves" banks can lend money based on OUTSTANDING LOANS...which another way of creating money put of thin air

Don't get me wrong.

This arcane and byzantine system works. I don't have a problem with it. But don't tell me that we have to pay back the "Debt". That would crash the system

It is fueled by interest and works because of it's inherent inflation.

The only problem is inflation. As long as the Fed controls inflation it's fine and so far it is and has done so

 

[Lesh]

Nope. It came from Toddster's pocket and that is where it will go back to. It won't go poof!

The Treasury prints actual money, you know.

Don't be stupid. I know you know better than that

 

[Roudy]

YES.

Just like, 40 years of corporate tax cuts paid for themselv

Only a delusional Leftist lunatic thinks raising taxes on Americans right after the worst pandemic in history when businesses have been shut down and record unemployment is a good idea. It just proves how out of touch the Democratic Party leadership truly is. The GOP of course wants the Democrats to continue with this lunacy. Obama and co., who are actually running the Biden presidency, will once again get their asses "shellacked" come the mid-terms.

 

[Toddsterpatriot]

Exactly. Who borrowed from another bank who borrowed from the Fed...who created it out of thin air...and will return it to the ether when it's repaid

Nope. Total bank borrowings from the Fed are only about $500 million.

Banks, on the other hand, are lending the Fed trillions.

 

[Lesh]

Only a delusional Leftist lunatic thinks raising taxes on Americans right after the worst pandemic in history when businesses have been shut down and record unemployment is a good idea. It just proves how out of touch the Democratic Party leadership truly is. The GOP of course wants the Democrats to continue with this lunacy. Obama and co., who are actually running the Biden presidency, will once again get their asses "shellacked" come the mid-terms.

Yea...except the taxes would be raised on the people who have done exceptionally WELL during that pandemic...while ordinary Americans have gotten screwed

 

[themirrorthief]

So, Trump can pass a $2.3 trillion tax cut for the rich and republicans have no issue with that but Biden signing a bill for $1.2 trillion more for infrastructure and Americans and republicans blow a gasket.

trump is the best biden is a senile old wreck who craps himself