Quote from: hugolp on June 19, 2011, 04:05:59 PM

My main doubt is what has the Labor theory of value to do with all this?

There are a couple of things:

Quote from: teamdren on June 19, 2011, 03:53:51 PM

The Fed does this in order to control, or manipulate the US money supply and therefore control inflation,

Central banks dont try to control price inflation, one of their tasks is to create price inflation, usually with a target of 2%.

Right, we're saying the same thing but have different word preferences here. By 'control', I mean, 'maintain a target rate of inflation'. The whole concept of using inflation to increase aggregate supply (in common terms, they try to make people work harder by making people think think they're getting paid more, when they're being paid with newly printed money that the government has created out of nothing) is headache inducing, but that's another article to be written someday.

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Traditionally Banks have lended out the money they receive from the Fed,

Its the other way around. Banks lend out the money first, and later on the Fed creates it to cover the banks.

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I may been unclear. I meant to say that traditionally the Fed buys securities from a bank, and then the bank will use the cash they've received from the Fed to make a loan.

Thanks for your reply, and, also, I really appreciate you taking the time to read what I wrote. I think that's really cool.