Quote:
Originally Posted by raslaje
This I don't understand. Suzy Q pays back $157.50. But if all the money involved is part of the current pool of money, how was any created?
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The Fed dictates that. They basically say, "Here is $500 go on and loan that out." From there that is how money is created. They give it to the banks with restrictions saying that they can use this money to loan out to customers. The "free" money can only be used in Bank's loan offerings and not for financing day to day stuff.
Stuff like this is only done at the Fed districts banks. Think of it as the banker's bank. From there it is sent downward to the private financial firms.