I removed that part because it wasn't relevant, but it does work exactly that way. The Federal Reserve simply credits the bank's reserve account from thin air.

Fiat currency is a shared delusion of value with invisible hands exerting forces to enforce certain behaviors (the Federal Reserve attempts to stoke inflation in order for the economy to reach full employment, arguably unsuccessfully, while technology and cheap Chinese labor is having enormous deflationary effects, with the result being real estate and equities turning yet again into asset bubbles); never be fooled that we're somehow "losing" value by forgiving debts at the national government level.

> Federal Reserve attempts to stoke inflation in order for the economy to reach full employment

No, the Federal Reserve attempts to provide easy money to spur employment, balancing that goal against the competing goal of controlling inflation. The Fed does not try to stoke inflation to drive employment (especially since inflation doesn't drive employment, though employment can help drive inflation.)

You're right, I misspoke. The Federal Reserve, through its mandate to obtain full employment conditions, creates inflation as a side effect.

Inflation's been really low recently.

We've barely scratched full employment. Who knows how long we'll be able to maintain it. The Fed has no room to cut rates if a slowdown occurs without going negative and several economic indicators are pointing to a slowdown.

Google "William F. Hummel money" and read the whole thing.

Technically, money is created when a bank writes a loan, but the Fed does meta-meta(-meta?) money creation on a global scale.

Right. "Buying 0 interest treasuries" is what the Bank of Japan calls it.

Interesting tidbit: We're way passed that with the BoJ. They're the majority shareholder of 55 companies on the Nikkei.

http://www.bloomberg.com/news/articles/2016-08-14/the-tokyo-...

That's right. The Bank Of Japan is printing money to prop of the value of top companies trading on Japan's exchange. Think about the macroeconomic causes and consequences of that.

Even Better think about the consequences of Japan's aging population relying upon the Japanese Government Pension Investment Fund, being propped up by the JCBs purchase of equities.

>The GPIF’s results are seen as a gauge of broad market performance, as the fund owns nearly 1% of global equity markets and more than 7% of the Japanese stock market. Domestic and foreign equities comprised 44% of the portfolio at the end of March, below its 50% target weighting for the asset class, the fund said in a statement. http://www.wsj.com/articles/japans-gpif-pension-fund-suffers...

There is this can they keep on kicking, hoping to out run the "current" malaise but you can't escape the Great Graying when your economies are dependent upon constant expansion.