If you missed out on my post from yesterday on Quantitative Easing, you can find the link to that in the comments below.

Today, I want to talk about the other way the Federal Reserve “injects” money into the economy. And that is “Debt Monetization.”

It’s basically a cheat-y loop the government uses to buy from itself. The U.S. Treasury issues securities, which is then purchased by the Federal Reserve. Basically, one branch of the government buys something from another branch of government.

In effect, this gives the government more money to spend (i.e. invest) in infrastructure of other government expenditures.

So no, the Federal Reserve is not sitting there with a huge printing press and literally printing dollar bills and giving it to banks! It’s (typically) through one of these two methods: Quantitative Easing (Part 1) and Debt Monetization (this post).

#TheMillionImpactMission