Reply To: Interest Rate Questions



The Fed does print money though.

“But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”

Courtesy of Bernanke

Just because the newly printed money is parked right back at the Fed in “excess reserves” does not mean that money hasn’t been printed. Just see what happens if/when Bernanke decides to stop paying interest on excess reserves.