Federal Reserve
The Federal Reserve it can be argued has done a great job of propping up the economy during the Great Recession with its easy money policies led by Quantitative Easing 1, 2 and 3. However, the growth in the stock market and the low interest rate on our ballooning debt is artificial as a result of the Fed's policies. Dialing back of their latest bond-buying program, is the finesse move confronting the Fed for the next five years. If the Fed moves too fast, it could cool the recovery. If it moves too slowly, it could fuel asset bubbles or excessive inflation. With the stock market booming since the election of Donald Trump, these fears are heightened.

Why all the money in the U.S. is not all the money in the U.S.

from NBCNews,

Banks don't have the cash to satisfy everyone who has deposited their currency — and that can become a problem.

President Donald Trump has again attacked his appointee, Federal Reserve Chairman Jerome Powell, complaining that former President Barack Obama got "zero interest" rates that let the economy expand. But early in his administration, Trump reportedly suggested, "Just run the presses — print money" to lower the national debt, according to the Bob Woodward book, "Fear: Trump in the White House." However, higher interest rates are one mechanism for lowering the debt. To see why, you need to understand some basics about monetary policy and the difference between money and the cash in your wallet.

As the country's central bank, the Federal Reserve tracks currency in checking accounts and household savings at banks and credit unions, amounts of less than $100,000 in deposit accounts like CDs and money market mutual fund shares. But that isn't all the money there is.

Banks take deposits of currency. They keep some in their vault and deposit the rest with various regional Federal Reserve branches. Then the banks lend money to individuals and companies. But the amount they lend is far more than the total deposits they have.

"If they've got $100, they're probably lending out about $90 of it," said Rob Baumann, chair of the economics department at College of the Holy Cross. And then the $90 ends up in other banks, which lend out another $81, keeping $9 in reserve. The $81 then gets deposited in yet a third set of banks, and so on. The result is far more money lent than on deposit. Banks don't have the cash to satisfy everyone who has deposited their currency — and that can become a problem.

When all a bank's customers come in and demand their money at the same time, it's called a run on the bank, something you've likely seen only in a movie, like "It's a Wonderful Life." Before the current monetary and banking system, they were a fact of life.

The Fed's major tool is interest rates: Lower rates stimulate the economy by making borrowing less expensive and spending easier, which drives up inflation as sellers raise costs because people have more to spend. Trump wants lower interest rates because, in theory, they would help speed the nation's economic growth. But higher interest rates would help retire long-term national debt.

Higher interest rates drive up prices. People and businesses need more money — currency, in this case — to put into their accounts. One thing they do is sell Treasury securities they previous purchased. The securities are how the government finances long-term debt. These do pay interest. The Fed can buy those securities with currency, trading long-term debt for short term. "Then the Treasury, which was writing checks to the public, is now writing checks to the Fed," English said. "But the Fed's income after expenses goes to the Treasury, so the Treasury is in effect paying itself." However, do this too much and the economy stalls.

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