Quote:
Originally posted by Bookman
Actually you may be right because the US does not produce money..the Federal Reserve Bank makes it.
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There are consequences to increasing the money supply. Basically, the more available something is, the lower its value. Having too great a money supply can also undermine the faith people have in the currency.
Further, the Federal Reserve uses monetary policy (changes in the money supply/cost of money) to regulate the economy. Easing monetary policy (making more money available or making it less expensive) increases employment and nominal economic activity but can lead to inflation. Restricting the money supply slows the economy, increases interest rates, lowers employment, etc. but can be an effective tool to decrease inflation. The last thing the Federal Reserve wants is to have to play catch up to the economy. Once the economy starts heading in one direction or another it's difficult to slow the momentum. Small cuts (or increases) in interest rates or reserve requirements for banks help to minimize the momentum. If the money supply gets too big, it's more difficult for the Fed to influence the economy.