Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Pretty good explanation here by Jim Bianco on what the term “money printing” is and what the Federal Reserve does when this term is used.
“The ability of the Fed to increase the amount of money in banks’ reserve accounts; that’s what most people mean when they talk about money printing and that’s under the direction of the Fed,” Bianco says.
The Fed can try to stimulate or restrict bank lending by either raising or lowering the amount of money banks are required to keep on reserve, respectively. This seems pretty straightforward. But “the Fed has the ability to go in and just change the number on [banks’] reserve accounts” — literally creating money electronically by changing the amount of money in reserve accounts, Bianco notes.
“If you or I did that it would be fraud, it would be counterfeiting and we’d go to jail,” he quips. “But when the Fed does it, it’s sophisticated monetary policy.”
5 minute video – email readers will need to come to site to view
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