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[i_heart_bulldogs]

It wasn't just you, I guess! Thanks for the tip.

[raoul]

I was going to make a long post, but the writing window is the worst. So anyway....

The Federal Reserve (Fed) does not "literally" print money, assuming that what is meant here is the actual creation of currency and coin. This is done by the Bureau of Engraving and Printing, and the US Mint, respectively. The Fed adjusts the supply of "electronic" money (essentially demand deposits) by buying and selling Treasury securities in exchange for U.S. currency. This expands and contracts (respectively) banks' reserve accounts, providing them with more or less loanable funds.

I assume this is a response to my response to the OP. Sorry about that--I should probably make sure I know what I'm talking about before correcting someone else. According to the Bureau of Engraving and Printing's web site, they print the money and send it to the Fed to be distributed. The Fed itself shreds old currency and orders more from the BEP. The Fed distributes the currency and decides how much to put into circulation.

But the essence of my objections to what the OP wrote still hold. The OP said:

The US goverment, he says, is literally printing money and that will cause costs to skyrocket.

 1) misuse of the word "literally." The "quantitative easing" was not an example of "literally printing money," it was an example of metaphorically printing money by increasing the supply of money recorded in electronic databases. 2) Whether its done at the Fed or at BEP, the fact is that someone is always "literally printing money," and this has nothing to do with expanding the money supply, it is simply necessary since paper currency wears out. The metaphorical printing of money might lead to inflation (or it might not), but the literal printing of money has nothing to do with it. If the government stopped "literally printing money," and the Fed stopped circulating what BEP printed, then within about a year you would start to find it very hard to get your hands on a dollar bill, and that would not lead to economic stability.

Perhaps this is just getting pedantic and silly--if so, I withdraw my objection. I literally don't know how much longer this thread can go on!

[i_heart_bulldogs]

I agree with Raoul. Most monetary expansion occurs through the "electronic presses," which are, in fact, controlled by the Fed. Banks have a hand in credit expansion.

[cgfunmathguy]

Perhaps this is just getting pedantic and silly--if so, I withdraw my objection. I literally don't know how much longer this thread can go on!

It had been dead for almost a week before Dr. Frankenstein you resurrected it.

[al_wallace]

I was going to make a long post, but the writing window is the worst. So anyway....

The Federal Reserve (Fed) does not "literally" print money, assuming that what is meant here is the actual creation of currency and coin. This is done by the Bureau of Engraving and Printing, and the US Mint, respectively. The Fed adjusts the supply of "electronic" money (essentially demand deposits) by buying and selling Treasury securities in exchange for U.S. currency. This expands and contracts (respectively) banks' reserve accounts, providing them with more or less loanable funds.

I assume this is a response to my response to the OP. Sorry about that--I should probably make sure I know what I'm talking about before correcting someone else. According to the Bureau of Engraving and Printing's web site, they print the money and send it to the Fed to be distributed. The Fed itself shreds old currency and orders more from the BEP. The Fed distributes the currency and decides how much to put into circulation.

But the essence of my objections to what the OP wrote still hold. The OP said:

The US goverment, he says, is literally printing money and that will cause costs to skyrocket.

 1) misuse of the word "literally." The "quantitative easing" was not an example of "literally printing money," it was an example of metaphorically printing money by increasing the supply of money recorded in electronic databases. 2) Whether its done at the Fed or at BEP, the fact is that someone is always "literally printing money," and this has nothing to do with expanding the money supply, it is simply necessary since paper currency wears out. The metaphorical printing of money might lead to inflation (or it might not), but the literal printing of money has nothing to do with it. If the government stopped "literally printing money," and the Fed stopped circulating what BEP printed, then within about a year you would start to find it very hard to get your hands on a dollar bill, and that would not lead to economic stability.

Perhaps this is just getting pedantic and silly--if so, I withdraw my objection. I literally don't know how much longer this thread can go on!

I'm clueless about economics, but I thought that the only way money was actually created was by LOANING it at interest.  If you add up all the credit out there, it all has to be repaid with MORE money than is out there. Therefore, more money. If banks can loan out say, 10 times what they have, then, in effect new money is created through bank loans. Am I missing something?

[i_heart_bulldogs]

Al_wallace,

Loans against savings are a way of moving money around. It's only new money if it is lent against demand deposits, rather than time deposits. This is the result of fractional reserve banking, where the reserve requirement is less than 100%.

[larryc]

Haven't other countries run much larger relative deficits without this level of inflation? And isn't the same thing true of the U.S. right after WW2?

[i_heart_bulldogs]

The governmental deficit isn't so much the cause of concern for inflation as the money supply is. The other thing is that the deficit isn't all currently "in place," as it were. Meaning, a lot of that money is still in bank accounts or in the planning stages, so the money isn't currently working it's way through the economy. As it leaks out, there will be some higher pressure on prices than in recent times. Much less noticeable, though, than if all the money was spent at once.

[mad_doctor]

BTW, did anyone else notice the sleight-of-hand this last week or two over how the banks have given back the money the Fed "loaned" them?  My grad students wanted to talk about this in class this week, and it was like one of those shell-game problems.  I kept telling them that the money never existed before the Fed gave it to the banks - it was created by an act of legislation to bail out the banks.  Now the banks are giving it back, but the Fed isn't removing it from circulation, so to speak.  In effect, the Fed gave itself a loan by creating a bunch of money to bail out the banks, and letting the banks give it back to them.  Now, SHAZAM!, Congress has all this extra money to spend on things!  They did the same kind of thing a few months back with t-bills, selling them and then buying them back two weeks later.  The real guy running the Treasury these days is that dude on Monopoly money with the top hat, handlebar moustache, monocle, and walking cane.