[RobertoG]

>>"Adding the money supply to the national debt would produce a meaningless number, so we don't do it."

If the money created by the FED is just a meaningless number , why don't they finance the government directly and the USA would avoid to pay bond interests?

[JumpCrisscross]

> If the money created by the FED is just a meaningless number

Money supply is not a meaningless number. The sum of money supply and the national debt is a meaningless number.

It would be like taking my checking account balance and adding it to the amount of cash JPMorgan Chase has on its balance sheet. Independently, they're meaningful figures. And one is related to the other. But the sum doesn't do anything useful.

> why don't they finance the government directly and the USA would avoid to pay bond interests?

This is called running the printing presses. Wherever it has been tried, historically, rampant inflation follows. The independence of the Fed is to ensure rate-making (and money supply) decisions, which have broader economic implications than the U.S. government's interest costs, are made apolitically. (That said, the Federal Reserve is the largest buyer of U.S. Treasuries and remits its profits to the Treasury.)

[RobertoG]

>>"This is called running the printing presses. Wherever it has been tried, historically, rampant inflation follows."

My understanding is that most of the cases of hyperinflation (Germany Weimar Republic, Zimbabwe..) were due to problems in the real economy, not to the printing of new money.

Anyway, it seems that, related to inflation, the important thing is the money that is spend in the economy in the current period, not the public debt (the money that has already been spent).

A big public debt doesn't mean inflation, as the case of Japan (or the USA) show. Public debt an inflation are two very uncorrelated variables.

[cconroy]

@JumpCrisscross how independent are they really? The fact that they will not entertain a thorough audit is in itself instructive. Perhaps central banking is too "centralized" and susceptible to corruption even in a well-run system like the Fed (the fact that the dollar is the reserve currency and they fight inflation ruthlessly too the detriment of employment). Perhaps a p2p software system could help ;)

[JumpCrisscross]

> they will not entertain a thorough audit

The Fed is audited by the GAO, the OIG, outside auditors, and its Board [1]. Its balance sheet is published weekly and closely scrutinized by the investing public as well as every bank.

> they fight inflation ruthlessly too the detriment of employment

The Fed has a dual mandate. Its post-crisis journey has been one of trying to stoke inflation.

[1] https://www.federalreserve.gov/faqs/about_12784.htm

[cconroy]

You're right when I used the word I was referring to "Audit the Fed" slogan à la Bernie Sanders & Ron Paul. The bill in question that was striked down is here [0].

The bill's purpose

> ...If enacted, the bill would also have ensured that the

> audit results would be available to Congress. The audit

> would include the Fed's "discount window", its funding

> facilities, its open market operations, and its agreements with foreign bankers. [1]

[0] https://en.wikipedia.org/wiki/Federal_Reserve_Transparency_A...

[1] https://en.wikipedia.org/wiki/Federal_Reserve_Transparency_A...

[JumpCrisscross]

> audit results would be available to Congress

This would effectively end the Fed's political independence. Agreements with foreign bankers seems acceptable, though even then it would be better to release it to a committee after a delay.

[dragonwriter]

> Its post-crisis journey has been one of trying to stoke inflation.

Well, “avoid deflation” would probably be more strictly accurate.

[AnimalMuppet]

The problem is that they're a gnat's whisker away from deflation. They want to stoke (some) inflation to give them a bit more maneuvering room.