Federal Reserve rolls out additional $2.3 trillion to stabilize economy

[Indos]

Can someone explain the process of printing money and where this will be taken from? Who pays for this?

Some time they try to hide the printing word and use quantitative easing definition instead

 

[antonius123]

China needs to be very vigilant. The United States can use this crisis to blame China, using it as an excuse to confiscate Chinese assets in the US and neutralize Chinese bonds bought.

Well it is happening now. US senator is proposing it.

 

[CrazyZ]

Money printing only holds value if there is something to back it up. in prior years it was backed by gold but as world population increased and so did the economy while the supply of gold remained constant many countries left it to fiat currency. fiat currency is backed by the guarantee of the government that that money has value.

so how can US print shit ton of money and not have the dollar devalue?

the way it works is like this
lets say US govt needs money $1 billion--> it goes to federal reserve and federal reserve will $1 billion print treasuries . treasuries are just an IOU note. The treasuries are then sold in the open market with interest. basically what happens is US govt needs money and federal reserve goes to international market saying US govt needs $1 billion and it will give 10% interest to whoever lends that money. so other ocuntries, businesses, insurance companies will buy those IOU notes and essentially give that $1 billion loan to the govt. so now US govt gets the go ahead to print a $1 billion in currency that it can use. then at the end of every year when US govt collects taxes it pays interest ton those who lent and pay some of the entire treasuries.

now some pointers here to that confuses people.

why cant then US print then just print more money and pay off that loan?
the thing is everything needs to be backed by something of value. the tax revenue US govt collects has value because that money came from labors people spent, businesses that did trade, farmers that sold food etc.
this value proposition is like if i take a piece of paper and write this is worth $100. every knows its worthless but if for example i am a shoe maker and i create a piece of paper saying whoever has this piece of paper is entitled to 1 pair of show. now suddenly that piece of paper is worth whatever the value of the shoe is

Why do other countries and business lend money to US?
because US is the strongest economy out there and investment is as good as cash plus youre getting interest on it. its like lending money to a billionaire who has enough income that you know hes gona pay you and give some interest on that

at what point printing enough dollars will cause loss in value of the dollar?
it depends on the tax revenue of the Govt. people are only willing to lend US money as long as US has the ability to pay. for example if US tax revenue was $100 and its expenditure was $80 you know US can afford to pay $20 of extra interest and as long as the federal reserve print money to that amount dollar will be stable. nobody will buy treasuries if lets say all the interest on the treasuries every year was $35 . people will know that US cant afford to pay them that much interest and no one will buy it and hence will loose value
- thats why when trump said that he will default on the govt debt or negotiate with the credit for a lower amount the treasuries fell

Till when can US keep lending?
forever, as long as the economy of the US keeps increasing --> US govt tax revenue keeps increasing US will always be able to get money. think about the last $100 example i said . now imagine next year US tax rev. increased to $120 and expenditure is $80. now i have the additional capacity to pay more interest and hence get more debt

I won't dwell on all in the minor details but money printing is the closest thing to QE in reality. Where did the federal reserve get the money to buy this debt?? How far can the USA take this debt....that's unknown. Japan has gone up to 200% of GDP.....but does not rely on foreign investment in debts like USA does.

This will have longer term ramifications for the USA. Any significant increase in interest rates will have a huge impact on USA government spending. In the medium term, the USA may be forced to choose between reduced defense spending or entitlement programs domestically. In the long run he USA may reach a point where all it can do is payoff its debt....no money for any other government spending.

 

[zectech]

If digital/banking money supply was very tight, investors would not have the excess funds to short FOREX and COMEX markets. Because of the inflation of money, money is used to make the dollar look more valuable in the shorting of other currencies and commodities. Two major indexes of inflation. Price inflation and currency inflation.

Naked shorts allows there to be inFINite quantitative easing/banking lending/etc without inflation.

Without short selling, the money could only be used to go long, which endless money would cause inflation around the board.

 

[Mk-313]

I won't dwell on all in the minor details but money printing is the closest thing to QE in reality. Where did the federal reserve get the money to buy this debt?? How far can the USA take this debt....that's unknown. Japan has gone up to 200% of GDP.....but does not rely on foreign investment in debts like USA does.

This will have longer term ramifications for the USA. Any significant increase in interest rates will have a huge impact on USA government spending. In the medium term, the USA may be forced to choose between reduced defense spending or entitlement programs domestically. In the long run he USA may reach a point where all it can do is payoff its debt....no money for any other government spending.

i answered all of those questions . and also u dont understand macro economics so let me clear some concepts so u can understand. but QE is a part of economy if the economy is growing too fast u need to ensure there is enough paper money to account for it.

"Where did the federal reserve get the money to buy this debt??"
As i said again federal reserve does NOT buy this debt . it prints the treasuries and sell the debt in the open market market.
right now the debt holdings are as follow
foreign entities e.g govt : 27%
domestic entities e.g business, mutual funds, retirements/ pension funds: 73%


How far can the USA take this debt?
Forever, As i said in my earlier post as long as the gdp of the US increases us will always be able to get debt. because entities giving the debt will have no problem issuing us debt as long as they know us has the capacity to pay them interest and when few of their treasuries matures, pay their underlying debt

Japan has gone up to 200% of GDP.....but does not rely on foreign investment in debts like USA does. ?
japan "cannot" rely on foreign debt because its currency is not a world reserve currency. basically given a choice between yuan and the dollar any external entity would pick the dollar because its the reserve. as long as ur domestic population believe thar ur govt can pay u the debt and the interest that govt will get debt.

Also, a little tid-bit back in the 70's japan was about to overtake US economy there wqas this loom and gloom like it is with china today. but PLAZA ACCORD set japan back 30 years.

Also another tid-bit having ur currency as the world's reserve currency is for the most part what makes u a super power. before world war 1 pound sterling was the worlds reserve currency. as a reserve currencies u have access to the whole worlds wealth because entire world is ok providing u debt. and if they hold ur debt in ur currency it is less likely that they would in the future choose any other currency to replace ur currency as the reserve or let ur currency fall because it would also erode their wealth. thats one of the reasons US issues debt to foreign entities because then its less likely those countries would support the fall of the dollar.

Also another perk, u have jurisdiction wherever ur currency is used. e.g if a money launderer converted his rupee to USD in a pakistani bank. US now has jurisdiction over that person even though hes pakistani national. thats how they prosecuted FIFA even FIFA has nothing to do with the US

"his will have longer term ramifications for the USA. Any significant increase in interest rates will have a huge impact on USA government spending"
Nope, US can to some degree control interest rate thatch the whole reason of the fed. if it contracts treasuries interest will go low. interest starts rising if the govt takes on more debt relative to the increase in economy of if people start losing faith in the US. think about it if there is a risk that the money i lend u will not make it back to me i will charge u higher interest to ensure i can recoup as much as possible

entitlement programs domestically. In the long run he USA may reach a point where all it can do is payoff its debt....no money for any other government spending.
Nope, as i said earlier it depends on the growth of economy which impacts the tax revenue. for example. in 2006 US govt tax collection was 2 trillion in 2020 it was 3.6 trillion so US increased 1.6 T in tax revenue which means it can afford to pay more interest and hence investors arent afraid to buy US treasuries and hence giving it loans.
out of $3,600 Billion dollars tax revenue.
US paid $200 billion interest and i believe close to $500-$600 billion to pay off some of the treasuries that matured

Also another tid-bit US can pay off its debt in 7 years if it closed the loop holes that big business use to hoard money in cayman island and avoid paying federal tax. US in estimate lose close to $3 trillion dollar worth of tax revenue because these companies use loop holes to pay $0 federal tax. i mean Apple is a technically owned by its ireland subsidiary company that has $250 billion in cash but because its an "ireland" company it doesn't have to pay US any tax.

The funniest one Bank of AMERICA. is technically owned by a company in bahamas i think and paid $0 federal tax lol

 

[zectech]

Commodity prices should be exponentially higher than gold at 2900. Long investors are losing their money and dropping out of the metals investment category daily for decades. You would need to give back COMEX long buyers and FOREX long buyers their money back from market manipulation that ignored "inflation and reported no inflation".

The whole market is manipulated to promote USA, USA!

The system is set up if you go long commodities to reflect inflation of dollars, you lose money.

The same is true of the FOREX, if you bet against the dollar, there are outside market forces manipulating the market to make you lose.

 

[CrazyZ]

As i said again federal reserve does NOT buy this debt . it prints the treasuries and sell the debt in the open market market.

I wont challenge your vast understanding of macroeconomics but the federal reserve is buying debt....not selling it. Its buying trillions of federal debt, mortgage backed securities, state and local debt, corporate bonds...the list is vast and unprecedented. You need to double check your info.

 

[Mk-313]

I wont challenge your vast understanding of macroeconomics but the federal reserve is buying debt....not selling it. Its buying trillions of federal debt, mortgage backed securities, state and local debt, corporate bonds...the list is vast and unprecedented. You need to double check your info.

its funny how you can say u aren't versed in macroeconomics but i need to double check my info. but for knowledge sake let me try u with the sources

https://www.investopedia.com/articles/economics/08/treasury-fed-reserve.asp
"The Federal Reserve and the Department of the Treasury also work together to borrow money when the government needs to raise cash. The Federal Reserve issues U.S. Treasury securities and conducts Treasury securities auctions, selling these securities on behalf of the Department of the Treasury. Examples of Treasury securities include:" as in it sells debt

that 12.2% you see is what we call " open market operations". that 12.2% is how the US controls the interest rate when u said the interest will rise or what i called contracting the treasuries

"When the Fed purchases these Treasuries, it doesn't have to print money to do so; it issues a credit to its member banks that hold the Treasuries by adding funds to reserve deposits. The debt then transfers from the member bank to its own balance sheet. It does this through an office at the Federal Reserve Bank of New York. The credit is treated just like money, even though the Fed doesn't print actual cash.This process is called open market operations, and the Fed also uses it to raise and lower interest rates when it buys Treasuries from its member banks"

if youre referring to that as debt buying even though no actual money is printed then i guess youre right

 

[CrazyZ]

U.S. Fed balance sheet increases to record $6.62 trillion
3 Min Read

(Reuters) - The Federal Reserve’s balance sheet increased to a record $6.62 trillion this week as the central bank used its nearly unlimited buying power to soak up assets to keep markets functioning amid an abrupt economic free fall due to the coronavirus pandemic.


Since early March, the Fed has slashed interest rates to zero, restarted bond purchases and rolled out an unprecedented range of programs to keep credit flowing and shore up business and household confidence.

The central bank’s balance sheet as of Wednesday rose about $200 billion from $6.42 trillion a week earlier. That is up from just $4.29 trillion in the first week of March.

It is now the equivalent of roughly 30% of the size of the U.S. economy before the crisis struck, and will certainly grow larger in the weeks ahead as the Fed keeps piling on assets and the economy shrinks.

The central bank continued to snap up Treasury securities, mortgage bonds and other assets, according to data released on Thursday. The Fed’s holdings of mortgage-backed securities rose to $1.62 trillion from $1.57 trillion. Treasury holdings rose to $3.91 trillion from $3.79 trillion.

Use of the Fed’s central bank liquidity swap lines, which allow foreign central banks to exchange their local currencies for dollars, rose to $409.7 billion on Wednesday from $378.3 billion the previous week.

Loan balances for the Fed’s discount window, its last-resort lending program for banks, fell to $33.7 billion from $36.3 billion a week ago.

Loans with the Fed’s primary dealer credit facility dipped to $31.5 billion from $33.4 billion the previous week. Use of the money market mutual fund liquidity facility slipped to $48.8 billion from $50.7 billion the week before.

Advertisement

The Commercial Paper Funding Facility II LLC, a special-purpose vehicle set up by the Fed with seed money from the U.S. Treasury, rose to $2.7 billion from $974 million on April 15. That facility began operations last week.

The newest item appearing on the Fed’s balance sheet was loans it has taken on from banks participating in the Small Business Administration’s “Payroll Protection Program,” initially rolled out at $349 billion but set to be expanded under new appropriations from Congress after the original amount ran out in less than two weeks. The Fed held just over $8 billion of PPP loans as of Wednesday, an amount certain to rise in the coming weeks.

The Fed also said it will shortly announce new rules to expand access the PPP beyond banks, so that a broader set of institutions can participate.

https://www.reuters.com/article/us-...creases-to-record-6-62-trillion-idUSKCN2253QD

 

[Mk-313]

U.S. Fed balance sheet increases to record $6.62 trillion
3 Min Read

(Reuters) - The Federal Reserve’s balance sheet increased to a record $6.62 trillion this week as the central bank used its nearly unlimited buying power to soak up assets to keep markets functioning amid an abrupt economic free fall due to the coronavirus pandemic.


Since early March, the Fed has slashed interest rates to zero, restarted bond purchases and rolled out an unprecedented range of programs to keep credit flowing and shore up business and household confidence.

The central bank’s balance sheet as of Wednesday rose about $200 billion from $6.42 trillion a week earlier. That is up from just $4.29 trillion in the first week of March.

It is now the equivalent of roughly 30% of the size of the U.S. economy before the crisis struck, and will certainly grow larger in the weeks ahead as the Fed keeps piling on assets and the economy shrinks.

The central bank continued to snap up Treasury securities, mortgage bonds and other assets, according to data released on Thursday. The Fed’s holdings of mortgage-backed securities rose to $1.62 trillion from $1.57 trillion. Treasury holdings rose to $3.91 trillion from $3.79 trillion.

Use of the Fed’s central bank liquidity swap lines, which allow foreign central banks to exchange their local currencies for dollars, rose to $409.7 billion on Wednesday from $378.3 billion the previous week.

Loan balances for the Fed’s discount window, its last-resort lending program for banks, fell to $33.7 billion from $36.3 billion a week ago.

Loans with the Fed’s primary dealer credit facility dipped to $31.5 billion from $33.4 billion the previous week. Use of the money market mutual fund liquidity facility slipped to $48.8 billion from $50.7 billion the week before.

Advertisement

The Commercial Paper Funding Facility II LLC, a special-purpose vehicle set up by the Fed with seed money from the U.S. Treasury, rose to $2.7 billion from $974 million on April 15. That facility began operations last week.

The newest item appearing on the Fed’s balance sheet was loans it has taken on from banks participating in the Small Business Administration’s “Payroll Protection Program,” initially rolled out at $349 billion but set to be expanded under new appropriations from Congress after the original amount ran out in less than two weeks. The Fed held just over $8 billion of PPP loans as of Wednesday, an amount certain to rise in the coming weeks.

The Fed also said it will shortly announce new rules to expand access the PPP beyond banks, so that a broader set of institutions can participate.

https://www.reuters.com/article/us-...creases-to-record-6-62-trillion-idUSKCN2253QD[/QUOTE]


the feds balance sheet is a whole new different discussion and a lengthy one that comprises, assest liabilites, money supply, credit to reserve banks vs how the US government's debt works