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Comment by AnimalMuppet | Hacker News Reader

If I understand what you just said, the Fed prints the currency. The Treasury prints notes (bonds), which it sells, getting money for, but incurring a liability (the bond that it sold).

When the Fed prints currency (say a $100 bill), what happens? Does the Fed just suddenly have $100 more than it did? Or does the Fed owe the Treasury $100? Or something else?

I don't immediately see a way that somebody (anybody) can print a $100 bill and still have assets and liabilities net out to zero...

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Money is an IOU. That is a promise of something.

When the fed create money is a liability for them:

https://www.federalreserve.gov/monetarypolicy/bst_frliabilit...

When you pay taxes, that liability is cancelled. The circle has to begin somewhere, and it begins and end with the government.

That doesn't seem to answer my question. When the Fed prints currency (not yet sending it to a depository institution), they (the Fed) created an asset. They also, if you and bubbleRefuge and cs702 are correct, create a liability, so that everything nets out to zero. My question: who does the Fed owe the liability to?

The Fed create money spending it. They don't create money and then spend it.

The government owe the liability to whoever come backs with that money to pay something (taxes normally). It will accept it as payment.

> Money is an IOU. That is a promise of something.

What is that something?

It used to be gold. Now it is $1 USD for $1 USD.

That's kind of tautological.

In particular, if you don't buy the whole premise (that dollar bills are US government liabilities), then RobertoG's statement (that "Money is an IOU. That is a promise of something.") is completely unconvincing by itself, without further support. And your "support" is not very helpful.

That's the point though: in some sense it's a circular house of cards. I linked this Edward Harrison piece higher up. Read the first paragraph and think about it for a minute. This is all a dollar really is, and its inherent, fundamental value is nothing other than that it allows you to pay taxes:

https://www.creditwritedowns.com/2011/10/currency-revulsion-...

A central point here is the statement that money has no intrinsic value, saying "Money is an IOU" may be understood to mean that, but in a very awkward way, it seem to suggest that something deeper is going on here.

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