JudgeHardcase on Nostr: This is not correct. The monetary base is the cash in circulation and bank reserve ...
This is not correct. The monetary base is the cash in circulation and bank reserve liabilities of the Fed. What the treasury owes the Fed is indeed essentially intergovernmental; but it is a Fed asset (i.e. only the asset half of the story).
It's like the kids passing around their parents' IOUs all over town - which the parents keep paying off by having to issue even more IOUs (each 1 with just a little less credibility than the 1 before it).
The debasement doesn't happen when the government borrows the money (which is virtually never directly from the Fed); it happens when the Fed increases its monetary base to buy the loan back from a 3rd party.
It's like the kids passing around their parents' IOUs all over town - which the parents keep paying off by having to issue even more IOUs (each 1 with just a little less credibility than the 1 before it).
The debasement doesn't happen when the government borrows the money (which is virtually never directly from the Fed); it happens when the Fed increases its monetary base to buy the loan back from a 3rd party.