The Bitcoin Layer
MONEY PRINTING 101: Banks Print Money To FUND The Deficit
Jun 10, 2024
This podcast delves into the intricacies of Treasury money printing, the monetization of T-bills by banks, and the process of money creation through Treasury deficit spending. It explains how banks purchase Treasury bills to generate new money, impacting liquidity and the banking system.
25:52
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Quick takeaways
- Deficits lead to money creation, fuelling inflation through government borrowing.
- Banks monetize T-bills without creating reserves, introducing new money into the system.
Deep dives
Money Creation and Treasury Spending
The US government's borrowing and spending of over $10 trillion in deficits over the past five years have led to the creation of new money in the system, fueling inflation. The podcast delves into balance sheet operations to explain how this money is generated. It highlights scenarios where the Treasury issues T-bills but delays spending, causing a liquidity decrease as money is drawn from other investments into treasury instruments, without injecting it back into the economy.
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