17 sats \ 3 replies \ @SimpleStacker 4h \ parent \ on: MONEY CLASS OF THE DAY: Central Banks Are Insolvent—Clownery or Nothingburger? econ
Do you have a decent understanding of how this works?
reply
Yes and no. I do not understand the inner workings or accounting details of any of this.
But what I do understand is that money is just a promise, and the government can get people to do stuff using these promises... as long as people continue to trust the promise.
As to whatever is going on in the books and behind the scenes, it only matters to the extent that it does or doesn't break peoples' trust. The numbers could be totally be made up out of thin air, but as long as people keep trusting the government, this deranged game can keep going on and on and on.
reply
The numbers could be totally be made up out of thin air
Sort of. When the numbers are positive, it's reasonably clear what's going on: the Fed is transferring the profits from their bond holdings to the Treasury.
However, when the number is negative, the Treasury isn't transferring loss compensation back to the Fed. Those losses are real economic losses, though, which means they have an incidence somewhere in the economy.
reply