I don’t have time to play…if your quick to get offended don’t listen but if you can deal with the facts by all means.
What I’m looking for is some answers! I need people who get it and can offer their perspective.
The Fed expands the money supply through a couple of methods. For simplicity, let’s consider “security purchasing.” When the Fed wants to expand the money supply, it buys a security — let’s call it Asset A — from a bank. Then it electronically transfers money to that bank. There is now additional money in the financial system that the bank can use to provide loans.
The nice part about being the Fed is that it doesn’t actually need to mail a box of dollar bills to pay for these securities. Instead, it creates a “reserve balance” liability on its balance sheet. The transaction is completely electronic. No hard currency changes hands.
Then, when the Fed is ready to reduce monetary supply, it sells Asset A. This puts the security back into the financial market and reduces money in the system, again electronically. Is that money destroyed?
On the one hand, the money no longer exists in the financial system.
On the other hand, it was only there temporarily in the first place. When the Fed gets that money back, it merely reduces the size of its reserve balance liability. In a sense, money is only “created” during an expansionary cycle electronically, through an accounting mechanism. It’s then “destroyed” in a similar, but opposite, accounting entry.
How do you change something your controller doesn’t want to change????