econ

💡 Money Printing Simplified

siggy47

>So, it is basically, you and me and others buying bonds directly in their IRAs, 401Ks, personal accounts, and indirectly through money market accounts (yellow area), US banks (green area), foreign central banks, i.e., Bank of Japan, Bank of China, etc. and other foreign buyers (brown area), and hold up, what's that blue area?

***NOT ME NOT ANYMORE***


But this is what pisses me off about the fed and this system.

Let’s say the US government says hey we got bonds to sell we are trying to feed kids at lunch time and the taxes are a little short. We are looking for $1000 with promise to pay back $1500 after 5 years. 

I show up with my $1000 having mowed lawns and selling donuts on the weekend.

The fed shows up with bank reserves. Which allows them to buy this bond.

The auction is intense the highest I can go is $1100 because my mom gave me $100 for my birthday.

The fed can go to $1500 because you this whole thing with bank reserves

The Fed wins with a final bid of $1101. Gets the bond. I don’t having actually worked and sold good I can’t capitalize on helping the government and getting a return for helping the government feed the kids lunch. 

