Re: Ping TXBill

Bob Giddiness wrote:

On Tue, 07 Oct 2008 01:20:41 -0400, Neon John <no@xxxxxxxxx>
wrote:


On Mon, 6 Oct 2008 08:55:49 -0500, "TXBill" <w8j6c4o7l2l9u4m5@xxxxxxxxx>
wrote:


They may even inject cash into the market, maybe even by printing money (usually a disastrous plan in the long run as it can often lead to runaway inflation, but one that can appear to work in the short term, which is good for political goals).

Bill,

This may be a dumb-ass question to a guy like you but hey, I'm a nerd and not
a financial guy.

When the government "prints more money" or the electronic equivalent, how does
that money get into circulation? Is the money just given to some
institution(s)?

I'm trying to envision this on a scale that I can wrap my arms around.

Suppose there's a countryette that has $1million dollars in circulation. Its
government decided that there should be 1.5 million so it prints 500,000 $1
bills. What next? Spending orgy? reward favorite friends?

John


I'm not Bill, but....

The Fed has the legal authorization to print money up to a
certain amount and put it in circulation. Other countries have a
National Bank or other entity doing the same thing. In any case
the new money is then lent to a list of qualified banks at
interest. Those banks lend it to others, including the one
handling your car loan.

Eventually this loan from the Fed to the banks must be paid back,
though it may be rolled over a number of times. At that time the
money is either lent out to some other bank or the Fed keeps it,
taking it out of circulation.

Money is constantly being put into circulation and taken out, so
as to maintain a certain interest rate. More money in
circulation lowers the interest rate, less will raise it. When
the Fed "sets" the interest rate, this is the mechanism by which
it is set. Money trades in a certain range of cost, according to
supply.

The mess we are in was ultimately caused by too much (too cheap)
money in circulation for too long a time. This was a decision of
the Greenspan Fed, 2002-2004.

If you push money out there people will find something to do with
it. And not always good things. The same thing that happens to
individuals with credit cards also happens to nations. They get
in over their heads.

Bob

What Bob seems to miss is the factor of tangible assets. The money supply can increase equal to the increase in tangible assets, and have no effect on the value of money. If it increases less, deflation results. If it increases more, then inflation results. Production is key. Technology can increase our productivity, and create more wealth for all of us. On the other hand, government regulation run amok can get in the way of increased production, cause LESS production, and otherwise lower the standard of living for all of us.

Of course, the most important factor of all is allowing the producers to keep enough of their profits to expand their businesses in order to increase productivity and jobs.

Fools like Bobby Fiction and his Liberal brethren think they can make the poor rich by taking that venture capital from the rich. They give the poor man fish (feed him for a day) with the money that the venture capitalists would use to "teach the man to fish" (feed him for a lifetime).

Teaching the man to fish equals giving him a job with the money that the Liberals tax away from the venture capitalist. They don't really tax the rich man. They tax the job away from the poor man.

Fools don't understand that.

Lon
.

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