Money

I have read that there are only three ways to pay for increased government spending: raise taxes, borrow more money, or print more money. Printing more money, if done on a big scale, unbacked by adequate collateral, can lead to wild inflation and economic disaster, as evidenced in post World War II in Germany, when the mark became worthless. I have been trying to find out what printing of paper money, except for replacing worn bills, is done by our U S Treasury Dept., One of the primary functions of our Federal Reserve System is to manage the nation's money supply. The Fed controls the money supply by open market purchasing of government securities (which I don't fully understand), altering the interest rate charged for money borrowed by local banks, and altering the reserve requirements of banks. For instance, raising the discount rate or the reserve requirement reduces the ability of banks to make loans and thus shrinks the money supply. Quoting from the World Book--Money--"The quantity of money in a country affects the level of prices, the rate of economic growth and therefore the amount of employment. If the money supply increases, people have extra money to buy things, and their demand for products grows. Earnings rise and spending increases, leading to further economic growth. However, if output cannot keep pace with demand, prices will increase. A continuing rise in prices is called inflation." Inflation can cause serious problems for people whose income does not keep pace with rising prices.
LSmith610o0@kc.rr.com