WASHINGTON — Another week in Washington, DC brings another week of debate over another possible round of stimulus checks.
But have you ever wondered where the money actually comes from?
The power of borrowing
For the most part, the federal government isn’t taxing the people enough to cover the bills — or, in this case, the stimulus checks.
Instead, when Congress approves a trillion dollar bill, the Treasury Department is tasked with borrowing the money.
The Ministry of Finance has the power to borrow from private investors, foreign entities and other governments.
In exchange for the money, the Treasury Department issues a bond or banknote that is basically an “IOU” and promises to repay the money later with a little interest.
Most Popular Borrower
For the most part, the Treasury Department comes up with the money by partnering with the Federal Reserve – the entity has the unique power to create money. But they don’t boot the machines to print a billion or a trillion dollars.
Instead, the Federal Reserve simply modifies their books and supplies some form of computer currency to the Treasury Department.
The Treasury Department then has the power to order the IRS to deposit those stimulus checks into bank accounts.
The word that scares many economists is “inflation,” and that occurs when there is too much currency in circulation and not enough goods.
When that happens, as in many third world countries over the years, a currency becomes worthless.
Most economists believe that the United States is not at risk as long as the country continues to produce goods and gross domestic product remains high.
Essentially, economists are counting on the United States to continue to grow.