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Why do we pay the interest on money printed?

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    Why do we have to pay to Bank Of England or the FED(if the US) on the money they print when the Government can issue loan-free money when they need it?

    Inb4, inflation blablabla. When we borrow money from the Bank Of England, we create new money out of thin air the same way as the government could do it itself without interest on them; And when you "pay this debt off" these money are kept into the economy.
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    It ensures that the banks will always be able to forclose on a collateral.

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    inb4 someone harps on about the Rothschild family.
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    (Original post by Greenlaner)
    It ensures that the banks will always be able to forclose on a collateral.

    Haha


    (Original post by A Mysterious Lord)
    inb4 someone harps on about the Rothschild family.
    So, may be you know why?
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    (Original post by Dog4444)
    So, may be you know why?
    It's just a conspiracy theory morons trot out whenever the subject of printing money/national debt is discussed.
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    (Original post by A Mysterious Lord)
    It's just a conspiracy theory morons trot out whenever the subject of printing money/national debt is discussed.
    Well, ok. I assume you know the answer to this question. Can you enlighten me, please (because I don't and want to know what other people think)?
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    (Original post by Dog4444)
    Well, ok. I assume you know the answer to this question. Can you enlighten me, please (because I don't and want to know what other people think)?
    I know in the case of the Federal Reserve, it's because it's a private bank. Money printed by the Federal Reserve is essentially a loan to the US government and as with any loan, interest is owed on it.
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    (Original post by A Mysterious Lord)
    I know in the case of the Federal Reserve, it's because it's a private bank. Money printed by the Federal Reserve is essentially a loan to the US government and as with any loan, interest is owed on it.
    You don't answer the question. Why we chose it instead of printing them ourselves debt-free?
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    Are you asking why we pay interest on what is, essentially, our own money?
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    (Original post by monk_keys)
    Are you asking why we pay interest on what is, essentially, our own money?
    Yes. We could print them ourselves when we need it, without debt and it would make no difference.
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    (Original post by Dog4444)
    Yes. We could print them ourselves when we need it, without debt and it would make no difference.
    This is what google had to tell me.

    The BoE is independent to remove politics from government borrowing.

    The majority of Bank lending is to other banks,
    (Original post by BoE)
    Since its foundation, it has been the Government's banker and, since the late 18th century, it has been banker to the banking system more generally - the bankers' bank.
    The majority of government borrowing is done through the Debt Management Office http://www.dmo.gov.uk/ since the BoE was made independent.

    We borrow rather than print because adding new money to the economy simply devalues everything to the new sum. It also causes instability because nobody knows when a government might print money and for what reason. Borrowing doesn't do this because money is simply being moved from one place to another (at an additional cost = the interest rate). This doesn't mean that printing always causes inflation and borrowing can't cause inflation but that in the quantities that countries run on borrowing is the safer option.

    However Milton Friedman advocated sensible printing over borrowing.

    I think this answers the question though there may be errors in there.
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    (Original post by monk_keys)
    Borrowing doesn't do this because money is simply being moved from one place to another
    When we borrow money, the BOE buys the government securities(bonds) through the banks with new-printed money. So, they dont move this money, they create new money and put it into economy. Like government could do it itself.
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    Technically they can't because it's against the Maastricht Treaty.

    (Original post by BBC)
    According to the Maastricht Treaty, EU member states are not allowed to finance their public deficits by printing money. That is one reason why the Bank of England will buy government bonds from financial institutions, not directly from the government.

    The Bank believes this form of QE is different because it is "printing money" as part of monetary policy - to prevent deflation. It is not printing money to help the government finance its deficit.
    (Original post by article 104)
    1.
    Overdraft facilities or any other type of credit facility with the ECB or with the
    central banks of the Member States (hereinafter referred to as ‘national central banks’)
    in favour of Community institutions or bodies, central governments, regional, local or
    other public authorities, other bodies governed by public law, or public undertakings of
    Member States shall be prohibited, as shall the purchase directly from them by the ECB
    or national central banks of debt instruments.
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    (Original post by monk_keys)
    Technically they can't because it's against the Maastricht Treaty.
    1) The bank buys the government bonds with bank's money. Government has to pay an interest to the bank. No new money created.

    2) The Central Bank buy these bonds from the bank with new-printed money. Government has to pay an interest to the Central Bank and new money are created.

    Right?

    I don't know about "technically", but in reality the Government pays an interest on new-printed money to the Central Bank.

    It's not just moving money around. It's the creation of new money.

    We have to pay an interest each time we inject money into economy. And we inject new money to prevent deflation.

    So why the government itself can't print new money and inject them to prevent deflation but without paying an interest?

    And yes, it's printing money to prevent the deficit, more accurately it's a hidden tax on us.
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    (Original post by A Mysterious Lord)
    inb4 someone harps on about the Rothschild family.
    you knew it was coming







    :rolleyes:
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    (Original post by Ano1)
    you knew it was coming







    :rolleyes:
    The last video looks interesting, but he didn't admit anything (I didn't understand what he said between 40 and 50 sec, what was it? Someone used to do something or what?).

    Are there any other possible explanations than that?
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    (Original post by Dog4444)
    1) The bank buys the government bonds with bank's money. Government has to pay an interest to the bank. No new money created.

    2) The Central Bank buy these bonds from the bank with new-printed money. Government has to pay an interest to the Central Bank and new money are created.

    Right?

    I don't know about "technically", but in reality the Government pays an interest on new-printed money to the Central Bank.

    It's not just moving money around. It's the creation of new money.

    We have to pay an interest each time we inject money into economy. And we inject new money to prevent deflation.

    So why the government itself can't print new money and inject them to prevent deflation but without paying an interest?

    And yes, it's printing money to prevent the deficit, more accurately it's a hidden tax on us.
    It's the premium we pay to flout the EU regulation?
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    (Original post by monk_keys)
    It's the premium we pay to flout the EU regulation?
    What?

    The BOE doesn't violate any laws, they don't loan money directly to the UK government, the do it through the banks and it's called (very posh) "Quantitative easing".

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