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The U.S. dollar is backed by debt.
Every dollar in our bank accounts is the result of an open loan. When a bank creates a loan, they simply use borrower’s account as a liability, and hold borrower’s promissory note on their asset side. This creates the Fiat currency that we utilize to pay for more liabilities. The dollar amount is used up as the debt gets paid down.
"Money" is also created when the central bank buys these debt instruments from the private sector. This is paid for by marking up the reserve account of the commercial bank through which the transaction occurred and more "money" has been created.
Banks need to be repaid in order to extinguish their liabilities while the Federal Reserve, does not. Federal Reserve Notes are liabilities created by deficit spending, they can only be extinguished via a federal budget surplus. So the Fed can create nearly limitless liabilities (they sell bonds) in order to fund government spending, with the only real limitation being the economy’s ability to meet the increased demand.
The U.S. dollar used to be backed by gold, which is lawful money according to Article 1 Sec 10 of the U.S. Constitution. All fiat currency eventually returns to it's original value 0. Robert Kiyosaki stated in an interview the the real money is in precious metals, land and artwork. How much money do we really have? Everyone is walking around in debt!
If you really want to build wealth, you must have assts. I personally prefer precious metals.
Travis Sayles Bey
Wiki User
∙ 11y agoobama
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What primarily determines the supply of money in the US economy?
Federal reserve
What entity controls the money supply in the US?
The Federal Reserve (the FED)
What is The supply of money in the US economy determined primarily b?
Federal Reserve
What government entity is responsible for monitoring the US money supply?
Federal trade commission
What decades was there both high inflation and rapid money supply growth in the US?
1970s
What guarantees a free press in the US?
The first amendment of the US Constitution guarantees freedom of the press. This amendment also guarantees freedom of speech and religion.
What primarily determines the supply of money in the US economy?
Federal reserve
Which of these is primarily responsible for the control of the money supply in the US?
The Federal Reserve
What entity controls the money supply in the US?
The Federal Reserve (the FED)
What important role did the Second Bank of the US play?
it kept the US money supply stable
This amendment guarantees there will be no excessive bail Bail is the money an accused gives to the court to guarantee that he she will appear for his her trial.?
The Eighth Amendment to the US Constitution.
What is The supply of money in the US economy determined primarily b?
Federal Reserve
What government entity is responsible for monitoring the US money supply?
Federal trade commission
What decades was there both high inflation and rapid money supply growth in the US?
1970s
What percent of US money exists in physical currency?
About 2-3% of the total money supply exists in physical currency.
What backs the US dollar?
Gold.
If there is high inflation the federal reserve will want to increase the money supply?
One of the two (according to the Keynesian) reason that can create high inflation is attributed to the increased money supply where "too much money chasing too few goods" Therefore, to reduce inflation, the Federal reserve would want to DECREASE the money supply. However, the increase in money supply can create stimulus demand and depreciate the exchange rate of the US Dollars which are considered (although questionable) beneficial to the US economy.
