U.S. Federal Reserve Conjures -- and Redefines -- Money (Matthew Cardinale)

Created by : Francis Goodwin View profile

Nov. 30, 2010 (Inter Press Service) -- ATLANTA, Georgia - The private central bank of the United States, the Federal Reserve, has begun purchasing $600 billion of long-term U.S. Treasury Bonds, essentially subsidising the federal deficit for the year.

The Federal Reserve has begun Quantitative Easing 2 or QE2 - "quantitative" because it is changing the quantity of money in the economy, and "easing" because it is easing the pressures of the market. (AFP/File/Patrick Lin)

Many economists say the significance of this new role for the Federal Reserve cannot be overstated, especially because the agency is literally creating money at the stroke of a keyboard.

The practice is called Quantitative Easing 2 or QE2 -- "quantitative" because the Federal Reserve is changing the quantity of money in the economy, and "easing" because it is easing the pressures of the market.

The vast majority of all money in the U.S. economy is created already, when private banks issue loans to individuals.