“Printing Power” in our title has a double meaning: It can mean “printing power”—the power to print money, which central banks have. But we will focus on “printing power”—the central bank’s money printing as an essential source of the power of the state, including of course the Federal Reserve’s printing to promote the power of the United States government.
The Fed is good at literal printing, exercising its monopoly of currency issuance granted by the government. It has outstanding $2.3 trillion in pure paper money circulating around the world, of which perhaps 45 percent, or more than $1 trillion, is held abroad. All the currency represents zero-interest-rate financing of the Fed and the US government. With interest rates currently at 5 percent, this means a potential profit of $115 billion a year for them by the Fed’s having issued the currency.
The Fed is also good at metaphorical printing, which is simply entering credits on the deposit accounts of banks in its own books. The Fed thereby creates money which it can use to buy the debt securities of the Treasury, or, in other words, to lend the printed money to the government. The Fed now has $4.1 trillion in deposits.
All together then, as of October 2024, there is $6.4 trillion in currency and deposits used to finance the American state’s programs, payroll, interventions, subsidies, and wars. The Fed can and does use its buying power to keep the interest cost of the government’s debt lower than it would otherwise be. At peak Fed, in March 2022, the Fed owned $8.4 trillion in Treasury debt and government mortgage securities.
Because the central bank prints power for the state, virtually all governments want and have one.
Hellbound and Down 