[WalterBright]

> What instance decides, if some printed money does or does not have collateral?

A great question. No actual decision is made, it's just that there are more dollars floating chasing the same value, so the price in dollars gets bid up.

[jollybean]

This is misleading.

There is a 'decision' made and there is always collateral - at the bank, and even at the Fed.

The 'decision' that might be made, is what kind of assets to accept on the Feds balance sheet.

At a private bank, they can do whatever they want with respect to what kind of assets they accept as collateral, within regulatory requirements. They have capital ratios to uphold, but if they take stupid risks, well they are going to go out of business.

The OP is implying that money is printed out of thin air and that is not what is happening.

Your retort that 'money money, in a system of all other things being equal, will raise prices' - but the implication of 'all other things being equal' is never a reality. Economies are usually growing, in which case, they need more money to keep prices from going down actually, and, there can be external shocks, which we see every decade or so.

[landemva]

This is misleading.

The Federal Reserve assumprion of bank's underperforming loans was done in 2008 with funds created out of thin air. The value of the underperforming loans was significantly less than face value, which is why banks could not sell them on the market. The Fed gave full value with magic money it created.