Swammerdami
Squadron Leader
Here's two:SHOW us ONE sentence I got wrong. Be specific.
Go ahead and view FedRes as a branch of USG if that floats your boat. It doesn't matter.
FedRes NEVER issues "fiat money."
First I ask you. What OTHER type(s) of money do you recognize besides "fiat money"?
1. The first sentence agrees with you that FedRes can be viewed as part of USG. Then points out that it doesn't matter. Or, more specifically, that it is often clarifying to treat FedRes as an independent bank. (Just like the Bank of England was and other early central banks -- they have special charters but keep books just like an ordinary bank). Indeed it was your insistence on viewing FedRes as "only" a non-independent branch of USG that led to your confused statements and misconceptions.
2. I should have written "FedRes never CREATES "fiat money" but the effect is the same. When the FedRes sells banknotes to Members, nobody's balance totals change. Money is not created. When the FedRes buys or sells bonds from/to a bank its balance sheet changes but none of M1, M2, M3 change.
Only when the FedRes buys bonds from a non-bank does M1 etc. increase -- money is "created." (When FedRes sells bonds to a non-bank M1 etc. decrease -- money is destructed. You seem to insist that the M1 increase when bonds are purchased from a non-bank is "fiat money." I explained -- in some detail -- why it is better thought of as "bank-created money." The confused claims in this sub-thread only INCREASE my belief that this distinction helps avoid confusion.
Private banks which buy bonds from U.S. Treasury create money ("bank-created money") when they do so, but that has nothing to do with FedRes. See how it works? Private banks create money (by buying bonds or funding other borrowers) and that money is called "bank-created money." I didn't think this should be hard to understand. (To avoid a round of rejoinders on the obvious, the BORROWER as well as the Lender is obviously involved in the money-creation transaction!)