Why does the American Government borrow money from the Federal Bank and then??

Question

charge income tax so it can use it to pay the Federal Bank interest??

Why doesn't the Government just make it's own money since it has the power to do so and save getting into debt and avoid interest??

Money is not backed up by anything, you probably "think" it is, but you don't work for the Government.

Answer 1

It doesn't work that way.

ok...? Apparently whoever gave me the thumbs down does think it works that way.

Answer 2

Sounds like you have not had an economics class. .

First of all, the government cannot "borrow" money from the fed. the Fed, is the controlling authority over all banks. .

the fed is governed by a board of governors that meet quarterly and make policy decisions about how much money to print, and any adjustments that need to be made of the interest rate.

When the Government borrows money, it does so with treasury bills, and savings bonds. . . It is obliged to pay interest on those loans. . .

If the Government just started printing money wholesale, it would be inflationary. . your $10 bill would be worth say 8 dollars, then 5 and so on. There has to be something backing that currency. American Currency is backed by the full faith and credit of the United States.

In other words, if the volume of money in circulation (known as (m1, the money supply), the buying power of each and every dollar would decrease proportional to the amount of excess currency. .

That is what happened in Germany after WWI. . Before they got inflation under control, they were printing 100,000 mark notes which were almost valueless. .

Currently, most of our national debt, is owed to, and held by foreign countries. .

Hope this helps!

Answer 3

the government and the central bank are one and the same.

Answer 4

This is an account book issue. Every item must be record.