“I don’t really understand the Federal Reserve. “
They print money out of thin air and give to the gov at interest. Whether we are talking $100 or $100 trillion, there is no way to pay it back.
“They print money out of thin air and give to the gov at interest. “
And what exactly is this mechanism by which the Fed collects interest on its printed money?
There isn’t one so don’t knock yourself out trying to come up with an explanation.
The only interest the Fed collects is on its holding of Treasury paper. Just like you get on any T-bills that you own. But unlike you the Fed has to turn the vast majority of the interest it collects over to the Treasury Dept.
If you want to do away with paying interest then tell Congress to pay off the national debt. The closest anyone comes to ‘paying interest on money’ is the interest paid on Treasury bonds issued to finance the government. And you pay that interest through the taxes collected by the IRS.
The Fed ‘prints money’ by buying Treasury paper on the secondary market. It buys or sells this Treasury paper in order to adjust the level of loanable money in the banking system.
If the Fed wants to stimulate lending by banks it buys Treasuries from them. The Fed gets the bond and the bank gets the cash. The bank can’t lend a bond but it can lend the cash.
If the Fed wants to slow down the economy it sells bonds to banks and that acts as a sponge soaking up their cash. The bank gets the bond and Fed gets the cash. The bank could have loaned the cash, but it can’t lend the bond.
This adjustment of the money supply is what the Fed’s bond holdings are about and it’s one of their primary functions.