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
The Federal Reserve Does Not Create Money
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
The Burden of Government Debt
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
Fed Funds Explained No. 6
“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
Musical Inspiration for Economic Policy
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
Constitutional Sound Bites
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
Get Government Out of Schools
If someone asked me how to solve our economic problems, I would respond, “Do nothing.” I believe in free markets; therefore, the market participants should act based on their preferences, not mine. But I know of one thing we should stop doing. We should stop all government involvement in schools. We should close all government … Continue reading Get Government Out of Schools
Biden’s Broken Window
I finally figured out how Bidenomics is supposed to work. He really is having an incredible amount of success in his economic strategy. It’s all based on what’s commonly referred to as “The Broken window theory.” According to the “theory,” destruction leads to economic growth. A most popular example comes from an essay written in … Continue reading Biden’s Broken Window
Fed Funds Explained No. 5
Impact of the Federal Funds Rate Popular Misconception If you start asking questions about federal funds in the federal funds rate, the response you receive will read something like the following: “The federal funds rate is one of the most important interest rates in the U.S. economy. That's because it impacts monetary and financial conditions, … Continue reading Fed Funds Explained No. 5
The Response to Coronavirus
The coronavirus has not caused lost jobs, closed businesses, restricted air travel, and many other adverse economic effects. Responses to the coronavirus have caused these effects. Were those responses appropriate? We may never know. Responses due to market intervention have been substantially different than they would have occurred in a free market. Introduction It will … Continue reading The Response to Coronavirus