Printing Press Fnord

When discussing the Federal Reserve and monetary policy, the Communism channel frequently shows a picture of a printing press printing new Federal Reserve Notes.

This is an interesting evil fnord. Showing printing presses provides the illusion "New money is printed directly by the Federal government."

That isn't the way the US monetary system works. New money is created only when banks issue a loan.

The Compound Interest Paradox applies whenever the Federal Reserve "monetizes the debt" and creates new money.

The Federal Reserve purchases new Federal Reserve Notes from the Treasury at printing cost, not at face amount.

Normally, when the Federal Reserve "monetizes the debt", it gives the bank an electronic credit of brand new money. Sometimes, the Federal Reserve "monetizes the debt" and makes the purchase with physical Federal Reserve Notes. That is how new Federal Reserve Notes are introduced into circulation.