Comment by chii | Hacker News Reader

Comment by chii | Hacker News Reader

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> Monetarily, Nvidia is creating a lot of money in our economy.

nvidia's money either comes from equity, or from debt. This means this money is "created" not from nothing, but from future commitments (ala, debt repayments, or promise of profits), which is not the same as what comes out of the Fed.

The Fed printing has no backing behind it - it is definitely inflationary if they do it. Investment from nvidia (or any other company) "creating money" may be productive enough to completely offset their inflationary effects - after all, the company investing demands returns from their investments, and so will only invest in things they expect to return much higher than the cost of interest (or cost of capital).

Therefore, you cannot compare Fed printing money to company investing money.

> this money is "created" not from nothing, but from future commitments (ala, debt repayments, or promise of profits), which is not the same as what comes out of the Fed

Most money is created by banks, not by the Fed. When banks create deposits they're booking it against a loan. Similarly, the Fed creates money by buying assets, principally Treasuries. There is an offsetting account. The only party that can truly just "mint" currency is the US Mint.

> you cannot compare Fed printing money to company investing money

Yes, you can. Nvidia creates M4 which drives M2 and thus M1. Banks create M1. The Fed creates monetary base. These are different components of the same money supply [1].

[1] https://en.wikipedia.org/wiki/Money_supply#United_States

No:

NVDA itself(!) does not increase M4 - if they give a loan, its an assets swap on their balance sheet with no influence on money in total available (since the money on their account is gone!)

The FED and banks can increase total money only.

When the Fed ‘creates money’ or as we say ‘prints money’ it is by buying Federal bonds from banks, no? Then the bank’s account is credited and it has more reserves. It is when total accounts at Federal reserve expand that base money has expanded. Similarly it contracts when the Fed sells bonds to banks. It is always tied to bonds from which returns are expected.

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