Is Credit Card Debt an expansion of the Money Supply?

[heavenlyboy34]

The "banks borrowing at 0%" thing is often taken out of context these days, because banks are usually pretty reluctant to borrow from Fed, they may at times in order to meet any shortages on their reserve-requirements but that's usually on an extremely short-term basis & is paid back very quickly but mostly they prefer borrowing on the inter-bank market rather than from Fed because you don't want your patrons to think that you're an unsound bank that doesn't have enough "credit" in the market to borrow from fellow banks.
It's usually used a lot during crises like the recent one but not necessarily on a regular basis.

So the usual path for Fed-money to enter the market is when they buy Treasuries, banks usually buy Treasuries at the auctions (not the Fed) & then when Fed needs to increase moneysupply enough to hit the "Target Rate" (which in turn tries to guide the interbank "Effective Rate"), they credit the respective banks, which is what creates "new money" to enter the market, then banks can lend it & the pyramidding begins!

So yes, borrowing by people matters, especially longer-term borrowing because borrowing increases moneysupply while paying it back decreases it.

I guess not re-paying the loan can be said to be "immoral" because it increases the moneysupply when it is borrowed & spent but it remains there if it isn't repaid & extinguished from existence. When one borrows & spends, they're essentially taking purchasing-power away from all the existing holders of money so they should produce goods/services to that extent & repay it

That's an interesting point. Note that currently the high unemployment rate lends itself to high welfare spending (people spending unemployment on food, durable goods, services, etc). So, we're burning the candle at both ends-inflating and spending/throwing good money after bad at the same time. It's a horribly designed system, obviously. It's destined to crash...it's more a question of "when?".

[Gumba of Liberty]

Again, even if T-bills & personal debt was paid off, there can STILL be fiat paper-money, it's existence isn't dependent on debt at all, it's just a misguided notion spread by some who just want to enrage people one way or another through misinformation, & misdirect them towards their own misguided causes.

Another thing, NO, debt is NOT essential to raising interest & curtailing moneysupply, the central-bank-money can just be withdrawn from circulation, plus, reserve-requirements can be raised to shrink the pyramid. For a long time, reserve-requirements were considered to be one of the tools in central-banks' repertoire to raise interest & to reduce moneysupply, many central-banks around the world STILL use this tool, most people just don't know about it because Fed hasn't been using it as they believe open-market-operations are a more faster & smoother way of adjusting moneysupply & interest but just because they aren't using it doesn't mean it doesn't exist, they can use that in absence of debt.

Neither is anyone forcing PEOPLE into debt, they go into debt because they want to. As I've said before, this "victim" mentality by the borrowers is the height of irresponsibility, if one wants to remain debt-free then JUST DON'T BORROW & LIVE WITHIN ONE'S MEANS, it's that simple; people borrowing & then blaming others for it is a sign of an unwillingness to take responsibility for one's own actions!
If borrowers don't borrow then that puts a significant restriction on banks' ability to lend & inflate anyway so borrowers shouldn't escape criticism, any more than bankers!

The Fed has multiple ways to get money into the economy but all of them include the creation of credit (also known as debt). Maybe you know something I don't but other than QE1, QE2, and Op. Twist, I do not see evidence that the Fed is in the business of circulating debt free currency.

Onto your other point, how does the central bank "just" withdraw currency from circulation? Reserve requirements are a powerful tool, but they only apply to the ability of banks to make new loans. it would not pull money that was debt free from the economy. Please, explain to me how reserve requirements effect debt-free fiat currency?

[Black Flag]

The Fed has multiple ways to get money into the economy but all of them include the creation of credit (also known as debt). Maybe you know something I don't but other than QE1, QE2, and Op. Twist, I do not see evidence that the Fed is in the business of circulating debt free currency.

Money is not debt.

The FED buys debt with money. This does not make money debt, no more than you buying a car with money makes a car money, nor money a car.

FED buys T-bills with money. They manufacture the money to buy the T-bill. The money is not debt, the T-bill is debt.

Onto your other point, how does the central bank "just" withdraw currency from circulation?

It sells the T-bills it holds in the open market for money.

Reserve requirements are a powerful tool, but they only apply to the ability of banks to make new loans. it would not pull money that was debt free from the economy. Please, explain to me how reserve requirements effect debt-free fiat currency?

Reserve requirements merely establishes the amount outstanding loans per dollar-money a bank can hold. It has nothing to do with currency or the amount of money in the economy.

[Jordan]

If you want to stop inflating prices, just stop buying gas.

[Black Flag]

If you want to stop inflating prices, just stop buying gas.

...which will not stop inflating prices.

Price inflation is a consequence of an oversupply of money to demand for money.

Like any economic good, money obeys the laws of supply and demand.

Oversupply, the price of money goes down -- means it takes more money to trade for goods; since goods are priced in money, we see this effect as "a rise in prices"

Deflation is the other way - a rising demand for money, means it takes less money to trade for goods, and the effect of "a fall in prices".

Oil is not money.

[Jordan]

...which will not stop inflating prices.

Price inflation is a consequence of an oversupply of money to demand for money.

Like any economic good, money obeys the laws of supply and demand.

Oversupply, the price of money goes down -- means it takes more money to trade for goods; since goods are priced in money, we see this effect as "a rise in prices"

Deflation is the other way - a rising demand for money, means it takes less money to trade for goods, and the effect of "a fall in prices".

Oil is not money.

Whatever you say, man. There's absolutely no relationship between spending and inflation - not at all! That's why the FED printed up money like it was going out of style in the past couple years and inflation has kept pace with the expansion in money supply.

[Black Flag]

Whatever you say, man. There's absolutely no relationship between spending and inflation - not at all!

Not at all.

Do not confuse "inflation" - whose effect is a systemic rise in prices across all goods and services with merely the rise and fall of specific supply and demand within a single good or service.

Oil going up or down is not inflation - it is price adjustments due to changes in supply and demand of oil.

Food/oil/car/wage/toothbrushes...etc. all going up is due to the increase in supply of money - and since all goods and services are priced in money, the effect is that all prices across all sectors reflect that change in supply/demand.

If we priced our goods/services in barrels of oil, then the rise and fall in demand of oil would change that price for those goods/services too.

That's why the FED printed up money like it was going out of style in the past couple years and inflation has kept pace with the expansion in money supply.

Since you do not hold a coherent theory of money, you made serious cause/effect mistakes.

The FED printing money has been given to the banks who - like never before in history of the US banking - stuffed into "Excess Reserves".

"Reserves" are the legal requirement of money a bank needs to hold at the FED so to support the loans the bank has issued.
"Excess" reserves are the over the legal requirement stored at the FED by these banks - it is money that is not lent to borrowers - instead held back.

Here is the graph:


For nearly all of banking history, excepting small blips, the banks have loaned out the money to the maximum capacity available, thus held nearly zero "excess" reserves.

Now -unprecedented in modern banking history- nearly $1.5 trillion of money held at the FED and not made into loans that has been held out of the economy.
Thus, no oversupply of money.
Thus, no inflation.

The day the FED stops paying interest (0.25%) and charges a fee for storing said money - you better be in gold....

[heavenlyboy34]

Money is not debt.

The FED buys debt with money. This does not make money debt, no more than you buying a car with money makes a car money, nor money a car.

FED buys T-bills with money. They manufacture the money to buy the T-bill. The money is not debt, the T-bill is debt.



It sells the T-bills it holds in the open market for money.



Reserve requirements merely establishes the amount outstanding loans per dollar-money a bank can hold. It has nothing to do with currency or the amount of money in the economy.

Depends on how you define "money". An FRN is "currency", but not "money". It is just legal tender (it even says so on the bills)-loaned into existence.

[Black Flag]

Depends on how you define "money". An FRN is "currency", but not "money". It is just legal tender (it even says so on the bills)-loaned into existence.

It is money.

It is manufactured by the FED.

One of the mechanics of introducing newly manufactured money into the economy is for the FED to buy a debt obligation of the Treasury, known as a T-bill. The government creates the IOU, sells to the FED for money, which the government then spends.

But the FRBN is money.

[Black Flag]

Another mechanism to introduce newly manufactured money is for the FED to buy assets such as property, like foreclosed property of the banks or their mortgages, or bullion. This is uncommon, but recently, exercised.