FORTUNE EXPLAINS HOW FED "PRINTS MONEY"

THE FED'S "ENDLESS" ABILITY TO PRINT MONEY IS EXPLAINED:


"But that worry overlooks the Fed's amazing power to create as much money as it needs - out of nothing, as it were.

Here's how it works. If an institution borrows, say, $50 billion from the Fed, the Fed can just post a $50 billion credit to the bank's account at the Fed, and the borrower can spend that balance on whatever it wants. It is indeed as if the Fed created cash out of nothing.

And if the Fed somehow needed more than $800 billion of Treasury securities, it could buy them in the open market, and deposit the payment for them in the seller's Fed account. That way, the Fed could lay its hands on however many Treasury securities it needed.

Yes, I'll grant you that this sounds odd. But if you ask a Fednik how this all works, he (or she) would tell you what I've just told you. Except that it would be dressed up in fancier language, with all sorts of explanations of how the Fed can do all this and still carry out its monetary policy."