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Comment by bananabiscuit | Hacker News Reader

My primitive understanding is that every dollar in circulation is borrowed from the fed and needs to be paid back with interest and that the only source of new dollars is borrowing them from the fed by way of the treasury selling bonds to the fed. If I am not missing anything (I’m guessing I must be) then wouldn’t the only possible outcome be that the nation goes into perpetually greater debt to the fed?

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That's a very common misconception.

No, most money is created by commercial banks [1].

[1] https://en.wikipedia.org/wiki/Money_creation

Treasury issues electronic debt, to fund Congressional spending beyond income, which loans dollars into existence.

Treasury prints paper dollars which are sold to 'federal reserve' for pennies per sheet.

Treasury mints coins which are sold to 'federal reserve' at face value.

Banks create debt money via fractional reserve lending for cars and houses and whatever. When those loans are repaid that debt money is extinguished.

That is a decent analysis.

This is also why the government tries to persuade people away from auditing the Fed, as it would be the nail in the coffin to the ongoing crime that has been perpetrated for the past 110 years: unchecked government spending would be impossible without the money printer at the Fed, and would collapse the military industrial complex.

It would collapse all of the society…if that were true.

But it’s not. The fed is regularly audited in the usual sense by independent third parties.

https://oig.federalreserve.gov/reports/board-financial-state....

Additionally, every security owned by the Fed, up to the detail of the identifying CUSIP number, is also available online.

https://www.newyorkfed.org/markets/soma-holdings

"hey we identified every single bond we bought with the funny money we printed out of thin air, so no worries comrade."

They keep USA's gold. When was the last full gold audit?

Not since 1995…suspicious…

So if this is the case why is raising the debt ceiling newsworthy event? Shouldn’t it be happening regularly by design?

Because Republicans like bringing the government to its knees every year. It’s insane and no other country does it.

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