Harry Veeder wrote: > Very few people seem to be aware of the fact that the US constitution > permits the government to literally coin money without having to borrow > it from their central bank. (I know this and I am not even an American.) > > Such money would correspond to what I termed an I-Thank-You note.
But the Fed came long after the constitution. I don't know whether it was set up with an amendment or just an act of Congress, but whatever, the power to "make money" was handed over to the Fed. And a good thing, too -- central governments canNOT be trusted with the power to create money. All the incentives are wrong, and hyperinflation tends to be the result: The government, as the biggest debtor, is also the biggest beneficiary of inflation. The Fed, though not perfectly independent, is distant enough that the President can't just order up another half-trillion in notes whenever he needs to pay the troops. Only the Fed can do that, and the Fed tends to be at least a little under the thumb of big business and big banks, and they generally hate inflation. (Contrast this with the situation in Zimbabwe, where the government controls everything.)
