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Question about Money Creation

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Question about Money Creation

Unread postby Bewildebeest » Mon 16 Oct 2006, 13:13:45

I've been unable to find an answer to this, so maybe someone here can help.

My understanding is that money (in the U.S.) is created in two ways:

1) Loans, which are controlled by interest rates set by the Federal Reserve
2) Printing of currency, by the Treasury Department

My question is: What percentage of new money comes from each of these sources?
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Re: Question about Money Creation

Unread postby gego » Mon 16 Oct 2006, 14:34:10

All of the money, except coin, is loaned into existence, even the "currency".

The currency is printed at the Treasury, but is issued as debt by the Federal Reserve Bank. Look at what you call currency and read what it says. It says "Federal Reserve Note" as in Notes Payable. It is a bill of credit, bearing no interest. It also says "This note is legal tender for all debts, public and private". It also is denominated as a certain number of "dollars". Being a Note, it is simply evidence of debt printed on paper.

If you want to know year to year what the changes in each component are, then just look at Federal Reserve Bulletins and see the changes year to year.
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