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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: Peter Dierks who wrote (713128)	11/15/2005 6:07:06 PM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 769667

Econ 102 --- in our modern Capitalist mixed economy, banks 'create' money (in vastly disproportionate amounts than the Treasury's printing, the bulk of which is for the replacement of worn-out currency) by their lending practices. See: "Velocity of Money" in any economics text. "Money supply ("monetary aggregates", "money stock"), a macroeconomic concept, is the quantity of money available within the economy to purchase goods, services, and securities." "...When thinking about the "supply" of money, it is natural to think of the total of banknotes and coins in an economy. That, however, is incomplete. In the United States, coins are minted by the United States Mint, part of the Department of the Treasury, outside of the Federal Reserve. Banknotes are printed by the Mint on behalf of the Federal Reserve as symbolic tokens of electronic credit-based money that has already been created or more precisely, issued by private banks[1] through fractional reserve banking." en.wikipedia.org The Federal Reserve Bank, by it's control over the Fed Funds Rate (the "overnight rate") and the discount rate, which is the interest rate that banks pay the Fed to borrow from it, and through use of other techniques (not to be confused with 'lesser' techniques), such as open market operations, which is the purchase and sale of Treasury securities, in effect 'controls' short term interest rates, greatly influences the direction of long term rates along wioth other market participants (long term rates are set by the markets), and has the 'whip hand' in mediating the process of MONEY CREATION... which is still predominately a result of the banking system.