The Whir Of The Printing Press

It would not be appropriate to spoil a perfectly fun Friday with the boredom of the US Federal (Reserve) Open Market Committee (FOMC for short) policy actions.  So let’s not go too deep, but let’s lay some groundwork around whether or not the Fed is really printing an unlimited amount of money.  In my mind, I picture an enormous secret warehouse dimly lit and filled with floor to ceiling size printing presses.  With all the machinery and moving parts, there is just one unshaven employee who has been down there for weeks.  He is sitting next to a lever labeled “PRINT.”  All day he sits and listens to the whir of these presses spitting off ream after ream of crisp 100 dollar bills. 

I like this little narrative more than reality.  In reality, someone punches in a few “1s” and “0s” on a computer screen and hits enter.  So what happens if there is no printing press and no lonely employee toiling away day and night?  

In today’s example we are going to use bottles and cans to illustrate how the fed “prints money.”  

Welcome to the newly created Federal Bottle & Can Deposit Committee (the FBCDC for short).  Two imaginary people, let’s call them Brian & Casey, have been drinking Mich Ultra beer and Diet Coke for a few months now and the stack of empties is piling high in their garage.  This same purchase of drinks and piling up of empties is happening all across America and it’s the job of the FBCDC to monitor when the level of empties out there is getting too high.  Until they are redeemed for money, these empties are just sitting in the garage taking up space.   If people stop drinking, the beer and soda makers won’t have enough work and will have to lay off employees which will lead to these former employees paying less income taxes and buying less beverages and so the cycle will continue to spiral downward.  When the FBCDC sees this happening, they need to act quickly to get more money into the hands of the consuming public.  With the press of a button, your empties disappear and are transported to the FBCDC recycling center and the money they are worth is deposited right into your bank account.  Voila, 200 cans at 5 cents a piece puts $10 right into your hands for you to spend and help get the consumption back up to speed!  No whir, no printing press, just the swapping of cans for dollars. 

Recently, our Fed has been “swapping bottles and cans” to put dollars into the hands of big companies, local governments and many more to help keep the downward spiral from picking up speed.  The side of this process that does not have a plan or get much press is that there are unknown risks to all this swapping.  There are potential consequences that can’t be identified in real time, but for now the Fed and our government seem content kicking that issue, I mean can, down the road. 🙂 

Happy Friday!  Please stay healthy and be safe!