In my example I am the government. I borrowed from you then spent the money right back. You've got your same amount of money as before, you're down the asset I purchased (the apple) and you've got a note from me. Then it was a bad example, because if you were the government, you wouldn't take the a...

When banks create money to buy bonds this adds to the money supply right? KShartle, banks don't create money to buy bonds (they use reserves that come from the government). Banks create money by creating deposits. Deposits can be used by individuals to buy bonds, but all that happens is that indivi...

KShartle, I think if you go back and read Tom's posts you will see that the bond already existed in the private sector before QE takes place. So, the increase in the broader money supply really comes from the bond issuance via Congressional fiscal spending. All QE does is change the composition of t...

When banks create money...they create money right? Do you agree with that? Yes. If banks "create money" they create money. :) And when they create it to buy bonds this adds to the money supply right? You are just proving my point. Yes. Fiscal spending from the Treasury adds to the broad m...

And they lose the asset that was purchased. If I buy an apple from your fruit stand for a dollar you have one more dollar and one less apple. If I borrow the dollar from you and give you a note, then buy the apple you end up with the same dollar you had, a note from me and one less apple. Huh? You ...

Kshartle wrote:When banks create money...they create money right? Do you agree with that?

Yes. If banks "create money" they create money.

Kshartle wrote:The "deposit" of the T-bond comes with the reduction in cash needed to purchase it.

Nope. The money that pays for the T-Bond is instantly given back to the private sector (it enables government spending). The private sector winds up with the cash and the T-Bond.

Kshartle wrote: If I borrow $100 from you does that create money? Is my IOU money?

http://monetaryrealism.com/loans-create ... n-context/

Are you saying banks don't create money?

Relax. I wasn't ascribing that belief to you. The idea that borrowing money creates money is obviously dumb. I'm sorry, but if you go back through this thread, you will notice that you respond to Tom with decorum, and you lash out at me. It needs to stop now , because it's disrespectful and I'm not...

The bond existed before the FED created the money. The bond was a net deposit in the private sector from government fiscal spending . You are conflating fiscal spending (Treasury/Congressional spending) with monetary spending (QE/POMO transactions). Fiscal spending increases the private sector's eq...

That is stupid. Again with the derision and verbal abuse . What is your deal? I'll ask you again, kindly, to please stop. Do I need to report your posts to a moderator? The government conjures bonds to spend money into the private sector — resulting in a net deposit of a T-Bond in the private secto...

The government has more equity afterwards. They have dollars to spend they did not previously. I don't understand how you can say that, and then 10 seconds later say this... If the government writes a check to itself for 1 trillion it is not a trillionaire. A fiat government is never rich or poor. ...

So... want to take a crack at the question?

If nobody has any additional "equity" after a QE transaction how can they possibly feel like spending more to create price inflation?

Wow. Everyone with a basic grasp in reality knows that printing slips of paper doesn't create wealth. Hyperinflation doesn't happen when people are wealthier. I can't believe you would ask this question. You must have meant to ask something else. Unless you think the guy in Zimbabwae with 100 quadr...

And, furthermore, Tom was pretty clear that QE increasing the monetary base doesn't increase overall wealth in the private sector. So, maybe you can explain how hyperinflation (of price levels) can take place if nobody in the private sector is any wealthier? Wow. Everyone with a basic grasp in real...

Schiff has said hyperinflation is inevitable if the FED never stops increasing the rate of monetary expansion. He expects them to end it before then though and the result will be a deflationary recession/depression. That's his prediction. It's the same thing Harry Browne said in his books plenty of...

whatchamacallit, Again, the proper accounting is found here: http://brown-blog-5.blogspot.com/2013/08/banking-example-41-quantitative-easing.html Thanks. That did help but I was trying to figure out where the reserves asset comes from right before the bond purchase. I'm pretty sure they just conjur...

Sorry to stir this up again but thanks for the replies. Here is how I am working it out in my head. It seems that before the Fed can proceed with QE, it basically gives itself a loan. This would allow for the asset to be created for the asset swap. Before QE Fed Assets                Liabilities $1...

KShartle, The Fed's QE purchasers don't exactly "bid up" bond prices in the way you imagine. It's a little more complex than you think... The New York Fed has a direct line to the biggest banks in the world (Goldman Sachs, Morgan Stanley, Deutsche Bank, etc — 18 in all). And it gets all th...

Of course the rates are artificially low. As Tom Brown pointed out, that is up for discussion . Some very intelligent people (far smarter than any of us) have different hypothesis about what the natural rate is. You might say that you, " think rates are artificially low," but you can't ve...

The money "printed" is actually out in the economy now affecting prices and causing reallocations of resources. False. It's not "out in the economy". The cash that is deposited into a bank's reserve account never leaves the Fed . All it does is change the composition of the bank...

As I'll show here, KShartle's opinions aren't supported by the facts: QE adds additional dollars to the money supply. ...and it simultaneously takes away financial assets from the private sector. Bank balance sheets do not become richer from this process. It does this via a swap for either Mortgage-...

whatchamacallit, The QE transaction only takes place between "Primary Dealers" (specially appointed banks) and the Fed. No individual in the private sector gets any money. Nobody is any richer after the QE transaction. The accountant-friendly balance sheet explanation is found here: http:/...

" be civil and courteous" the above applies to how we respond to aggressive or abrasive posts as well as the posts themselves, That's true. However, despite previous warnings, his language has gone beyond "aggressive or abrasive". He has become verbally abusive towards those who...

You are lying...you don't understand the concept or you're just lying...is just such nonsense...It really says something about you...You are one of those people...You don't even care how ridiculous you sound...It's like you didn't even read what I wrote...This entire discussion is so stupid I can't...