Forum Post: Printing Presses

Nice to meet you, "I am Ben Bernanke." I am the public figure who has the ear of the President of the USA on monetary policy. It is "my boss", The Federal Reserve, who determines this Monetary Policy. My bosses let me know and then I tell the president "how/what/where/when" that policy will be.

Anyway, my bosses push buttons and "print money". That's right, they tell me to tell the Treasury "how much" and when to print it.

Those printed sheets of paper then get sent out to small and large banks across the country in terms of a "loan". Those banks pay "my bosses" interest on the money we loan them. Those smaller banks then loan that money to the local people in the towns and cities across America. Those people, such as a local farmer, then pay interest on that money loaned to them.

To get dollars, one must produce something. A farmer produces potatoes. He sells those to other people, for dollars. The farmer will hopefully sell enough potatoes so that he can pay back his loan and still have a few extra dollars left over for himself. He might even be a big-time farmer with a contract to supply potatoes to the military so they can feed their troops. Then he will probably have a lot of dollars left over for himself!

Sometimes my bosses and myself go out to eat and go on vacation. We stay in some pretty nice hotels and eat at incredible restaurants! We pay for all of that in dollars. Those restaurant owners sometimes have loans with the local bank. They hope to sell enough food so that they can pay back the interest and still have a little left over for themselves.

Both the farmer and the restaurant owner pay those dollars back to the local bank and the local bank hopes to be able to pay back the interest on their loan from the Federal Reserve.

Every once in a while, my bosses decide they want to loan some more money out, so they print it up. Then begins the same process of giving that money, as a loan with interest, to banks across America.

The cool thing is, sometimes we don't really loan it out for interest. Sometimes we might just give it to somebody and say: "Ahhh, you don't really need to pay us back... in dollars. It's ok. We know that you don't have a farm. But, come to think about it, we will give you some cash if you do us a little favor."

It's pretty cool, we have all kinds of people who like to do us favors.

...more later...

Ok, and now my story continues: http://occupywallst.org/forum/printing-presses-part-ii/