The nature and effect of government borrowing seems to confuse people. Most explanations of government borrowing tend to complicate the subject beyond comprehension. First, why does government borrowing occur? The government must have a source for every dollar it disburses. Taxes provide the money for most of those disbursements, but when the government spends more money … Continue reading Government Borrowing

Many years ago, I bought a stolen car. I did not buy this car from the person who stole it, but I did buy it from the person from whom it was stolen. Fortunately, he went through the judicial process to get his title restored. The experience made me think about who actually owns our … Continue reading Who Owns Government Property?

Introduction People frequently refer to the open-market operations of the Federal Reserve Bank as if all participants were the same. That definitely is not true. The Fed deals with different entities in what they refer to as open-market operations, but there are some important distinctions. I will briefly outline the major distinctions between the different … Continue reading Who Sells Securities to the Federal Reserve?

The “laws” of physics change very slowly. The technology we use to apply those laws, however, can change rapidly. We have been able to calculate the amount of power in a gallon of gas for a relatively long time. The amount of that power transmitted to the road has changed significantly since the invention of … Continue reading Death of Deposit Banking

Introduction In an earlier post (The Fed Does Not Create Money), I explained why the Federal Reserve banks do not create money. In this post, I will return to the definition of money and explain who creates money and the process by which claims used as money get produced. Definition of Money Money consists of … Continue reading Money Creation

Synopsis Over the years, many goods have been used as “money.” Because a good has been used as money in one situation does not make it money in all situations. The market determines by its use what good qualifies as “money.” The market in the United States generally uses something we call “dollars” as money. … Continue reading The Federal Reserve Does Not Create Money

Introduction Congress has returned to its frequent discussions about raising the debt ceiling. They believe, and rightly so, that most voters think the government runs like a business or individual. They make a big show of running around trying to figure out, “Where can we get the money to pay for all the spending?” But … Continue reading The Burden of Government Debt

“The Fed Buys U.S. Securities” A truth subject to misinterpretation. Introduction “The Federal Reserve purchases U.S. Treasury Securities to expand the money supply.” This statement contains some misinformation, and some truth and can be misleading. I will deal with these three points in order: Misinformation I have explained in an earlier post [“Who Actually Makes … Continue reading Fed Funds Explained No. 6

After two and one-half years, I thought I would search for music that might have inspired President Biden’s disastrous economic policies (even though he might not know an iPod from a Victrola). It would seem that he got some of his inspiration from one of my favorites, Muddy Waters: Song: Born With Nothing I don’t … Continue reading Musical Inspiration for Economic Policy

What was the true purpose of the Bill of Rights? In this political season, it seems appropriate to remind politicians of the true purpose of the Bill of Rights. To make the point, I have selected “sound bites” from each of the first ten amendments: Congress shall make no law… …the right of the people…shall … Continue reading Constitutional Sound Bites