addendum for Leigh Harkness

["William B. Ryan" <william_b_ryan@xxxxxxxxxx>]

Leigh, in re-reading one your earlier posts I cam across this:

http://csf.colorado.edu/forums/pkt/2002II/msg00282.html

"...Printing money to finance government expenditure could have similar
effects but this is relatively trivial in the real world.  I have tried
it and it has a very limited effect.  The banks send the money back to
the government, debit the banks' accounts and the government ends up
effectively borrowing from the banks anyway."

That's because the government is subservient to the banking system.
The "printed money" is treated exactly as if they were checks by the
banking system in that they clear back to the Central Bank just like
Treasury checks.  The Central Bank then debits the Treasury's transactional
account and returns the "cancelled" or "withdrawn" "money" to the Treasury
as if they were ordinary checks.

In principle, the government could assert its sovereignty and require
that the Central Bank hold the government disbursed currency that clears
back to it in its vault exactly like it holds securities purchased through
the "open market" on its own volition.

Bill

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William B. Ryan
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