Where Your Dreams Become Reality
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Poster: ryan foreman
Subject: RE: Federal loan payments - who do they go to? (please dont delete!)
Not sure what you mean by "destroyed". Also, the vast bulk of federal money should not be considered as just printed. Most is either tax revenue or borrowings from people, corporations and governments at low interest rates. I guess all money is ultimately just created by the Fed. But there is substance behind it, albeit less than before. Yes the Fed is doing radical stuff with "Quantitative Easing" but you shouldn't say that any and all federal government money is just printed. Because then of course we really would have hyperinflation. But we don't.
I can only answer your question with the obvious. The money you pay back goes to the treasury. The interest is recorded as government revenue.
As far as I can understand you, I think you are generally right. Just that the answer lies somewhere in between so that there is only a reasonable amount of inflation. That is what the existence of the Fed is all about (or should be)- Maintaining a stable money supply. If more people are clamoring for the same amount of money, the Fed simply increases the money supply and inflates the economy by buying back treasuries from banks.
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