slimpickens93
doesn't the federal reserve print the money out of nothing?
Well, yes, the physical paper itself is printed "out of nothing" so to speak, but really this is besides the point. Can you think of any way for paper money to exist other than for it to be printed out of nothing?"
Of course not.
That means it is still "ours."
...well, yes...but what is "yours"? Not the money. The debt. The money itself belong to the treasury.
Think of it this way: Imagine that people are trading in some sort of hard commodity. Gold, for instance. Or food. or rocks. Doesn't matter what it....people like it, want it, and trade with it. The problem is that it's heavy. It's not practical to carry around a hundred pounds of gold, or food, or rocks. So you create paper "money" and assign a value to it. Money with a "one" on it is worth one pound of gold, food or rocks. Money with a hundred on it is worth 100 pounds of gold, food or rocks. Obviously, the paper will be a lot easier to carry around with you, and this is what makes it useful. The theory with a "backed" currency, is that at any point you can trade in the paper for gold, food or rocks.
Our curency however, is a fiat currency. This means that you can't trade the paper in for gold, food or rocks. Oh sure, you can "trade" the paper for these things if somebody is willing to trade with you. But there's no central organization that stockpiles gold, food or rocks and promises to trade a pound for each bill. Their relative "value" is subject to change, just like any commodity. The value of the money is not fixed, or tied to anything. And...because of that, there's nothing stopping people from simply printing more, as much as they want. If the banker who prints paper money knows that anyone can at any time walk into his bank and demand gold, food or rocks in exchange for the paper he's printing, he knows he can't print paper money endlessly because it will become worth less, and it he lose out when trying to keep his gold, food and rock supply going.
Money is a negotiable instrument. It is a note. It is a promise to pay back to the note issuer. In accounting language, the person who "holds a note" is the person to whom something is owed, not the person who owes.
Here's the twist: In our financial system, currency instruments (dollars) are printed by a private bank (the Federal Reserve) which prints them at request of the federal government, in exchange for a promise that they will be paid back, with interest.
Thus...rather than our currency being paper that can be exchanged for gold, food or rocks...it is a debt note that constitutes a promise to pay a debt, with interest, back to the federal reserve.
Fascinating stuff.
