Free Republic
Browse · Search
News/Activism
Topics · Post Article

To: norraad

What you are seeing is the old bills being replaced by the new. Currency is an almost insignificant fraction of the money supply. The bulk is in savings or checking entries, or Treasury debt.

When the Fed ‘adds money’ to the banking system it does so by purchasing Treasuries, the result being an electronic entry on some bank’s account book. The Fed creates the cash to purchase the Treasuries - what it is doing is changing the form of money in the financial system from Treasury paper to cash. The size of the money supply is determined by Congress when it sets the limit on Treasury debt, although as cash it can expand greatly in the banking system due to fractional reserve lending. In theory the Fed could purchase all of the national debt, converting it to cash.


151 posted on 07/14/2008 9:29:42 AM PDT by Pelham (Press 1 for English)
[ Post Reply | Private Reply | To 148 | View Replies ]


To: Pelham
Thank you, I've also been told the use of credit cards helps expand money supply.

If so, how and what %?

152 posted on 07/14/2008 9:36:26 AM PDT by norraad ("What light!">Blues Brothers)
[ Post Reply | Private Reply | To 151 | View Replies ]

Free Republic
Browse · Search
News/Activism
Topics · Post Article


FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson