Right now, the U.S. feels that it needs to increase the money supply to stimulate the current weak economy.
So, the U.S. is increasing the money supply. Basically, what’s the money supply?
According to Investopedia, the money supply is “the entire stock of currency and other liquid instruments in a country’s economy.”
One way the government can increase the money supply is to, literally, have the Federal Reserve create new money out of thin air. I say literally because now most payments and transfers of money are done electronically. Meaning, the Federal Reserve does not have the Treasury print paper currency. The Fed simply creates the new money with a few clicks on a computer.
When the Federal Reserve creates the money out of thin air it’s in the form of debt, money that has to be paid back by “we the people” with interest.
Interesting, why don’t we the people, collectively, print the new money out of thin air, and not in the form of debt (something that has to be paid back by the people)?
Then have the government distribute the money to productive people (someone who will build, make or produce something). Not to people who just consume or buy diamonds worth millions, but to productive people, rich or poor people, who will produce something.
The national debt would be much smaller, if anything.
No matter who creates the money out of thin air, there’s the possibility of inflation and the issue of the velocity of the money to deal with, but regardless of the inflation or velocity issues, the entity that creates the new money out of thin air, gets to reap all the rewards of getting paid back the money with interest.
Now I get it. We have a Federal Reserve so an extremely small group of people get most of the financial rewards of creating the new money out of thin air.
That makes a lot of sense if you’re one of the very few who gets to reap the financially rewards, but it doesn’t make much sense for the vast majority of Americans who gets stuck with paying back the money with interest.
Why don’t all the people and politicians who claim to care so much about the middle class, all get together and suggest that America abolish the Federal Reserve and create the new money collectively and in non-debt form?