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Social media is abuzz with a shocking clip of Biden’s top economic advisor fumbling to explain the fundamental mechanics of our financial system.

The only thing missing from this train-wreck answer from Chairman of Biden’s Council of Economic Advisors Jared Berstein is the “such as.”

To be fair, the mechanics of how the US government sells bonds and how money is printed are somewhat complex, and the regime is lucky it is, because once people find out how the sausage is really made, the entire scam becomes clear.

Here is a decent attempt to explain the mechanisms of money printing and bond purchasing and selling.

Nik Stankovic:

Lots of people chuckling but nobody suggesting an answer, at least in language that normies can understand.

US government doesn’t really print money, because printing money is irresponsible. If US government just printed money, it would go straight to inflation, and not 5% but more like 50% or even 500% or even 5000% per year. They wouldn’t be able to do it for a very long time.

So what does US government do? It sells bonds (debt). It borrows money. That debt is bought by other countries or by Americans who have extra money. Why do they buy US government debt? Because it is safe and gives interest. It’s like putting the money in a a bank or CD only better. Mainly because it is safe. Who would you rather lend money to, US or Serbia?

Take China: China gets a lot of dollars from the US for its exports to the US. Some of it is used to buy American products, but, as we know, China exports more to the US than it imports. So it has extra dollars. What is it going to do with those dollars? It buys US debt, because it gets some interest on it then. Otherwise it would just sit in the bank doing nothing.

So far so good.

But what happens if there are not enough buyers for US government debt AS HAS BEEN HAPPENING REGULARLY SINCE 2008.

Does the US government say “oh shucks, I guess we’ll just have to spend less?” Of course not.

Enter the Federal Reserve, or the US Central Bank. They just buy up whatever debt nobody else wants. Where does the Federal Reserve gets the money to buy that debt? They don’t. They print it.

You see, it is not the US government that prints money, it is the Federal Reserve that prints money. And they are not part of the US government. Who are they? They are a private bank. What? Yes. Wait. That doesn’t make any sense.

Well, that’s why this guy is confused.

So what if the Federal Reserve goes bankrupt? Why would they go bankrupt? They can just print money forever.

So this is all one giant scam? Yeah, the biggest scam of all scams. So why do people participate in this scam? Like China? Well, China kind of does the same thing. For one, two China benefits from it. Americans buy lots of stuff from China, that’s jobs. But what does China do with the dollars they are just pieces of paper? It goes and buys a gold mine in Serbia with the dollars. Why would Serbia give China a GOLD MINE in exchange for some dollars? Because Serbia can use dollars to buy oil from Saudi Arabia. So what does Saudi Arabia do with the dollars?! It buys US debt, silly.

Read the rest…

At the end of the day, it’s the US dollar’s status as the global reserve currency that allows this dysfunctional system to take place. For better or worse, contrary to much of what you hear in the media, the US dollar’s reserve currency status is secure for the indefinite future—or so our guest writer argued persuasively in one of our most provocative and sophisticated pieces. The reader is invited to judge for himself.

Revolver:

The U.S. dollar will someday lose its status as the global reserve currency, but it is delusional to think that this will happen on a timescale short enough to affect domestic politics.

Those who anticipate a collapse of the dollar often subscribe to an “imperial” theory of currency zones. They argue that the U.S. dollar is held by other countries because the U.S. military implicitly (and perhaps occasionally explicitly) threatens foreign banks or governments: “If you don’t use our currency, we will give you the Qaddafi treatment.” The people who hold this view essentially believe that military power underlies U.S. dollar (USD) hegemony and that our allegedly deteriorating military capabilities and recent losses portend a wider depreciation of the dollar.

As the conflict in Ukraine suggests, this view is obviously false on a short time horizon. First, the premise is probably false: the U.S. remains the world’s preeminent military hyperpower. Russia cannot project power more than a few hundred kilometers outside of its borders. China’s ongoing demographic crisis rules out a military reconquest of Taiwan in the foreseeable future. Second, for the sake of argument, let us concede that the U.S. military capacity is on a relative decline: the dollar has continued to rise relative to the Euro and the Chinese renminbi even after the U.S.’s ignominious withdrawal from Afghanistan. The U.S.’s attempts to remake the Middle East are a clear signal of imperial insanity if ever there was one, but the USD has continued to appreciate against its competitor currencies. But how does this argument hold up when projected into the longer time horizon, to, say, 2030 or 2050?

Read the Rest: Sorry Zerohedge: For Better or Worse, US Dollar Will Remain the King of Currencies

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