Tom Purcell
special to the daily

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November 19, 2012
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Purcell: Our money factory

Good morning, class," says the sixth-grade teacher. "Today, we have a special guest from the U.S. Bureau of Engraving. Mr. Bob Johnson is going to tell us how money is made. Feel free to ask questions."

"Good morning, students," says Mr. Johnson. "Did you know that in Washington, D.C., and one other location in Fort Worth, Texas, the United States government operates one of the largest printing operations in the world? Every day, we print 38 million paper bills!"

"Gee, Mr. Johnson, that is a lot of money," says a boy in the class. "But I thought the government makes most of the money electronically these days."


"Then why does the Federal Reserve keep creating new money and dumping it into the economy?"

"Well, young man, sometimes, when the economy is really bad - like it has been since 2008 - some people think it is a good idea to expand the money supply."

"You mean create money out of thin air, Mr. Johnson!"

"In America, the Federal Reserve is now in its third phase of 'quantitative easing.' It is what economists call an 'unconventional' monetary tool that allows a central bank to stimulate the economy."

"I don't understand, Mr. Johnson."

"Look, when the economy is bad, the Fed reduces short-term interest rates to encourage people to borrow more and stimulate activity. The Fed has the rates set at nearly zero now, but the economy still hasn't responded. The only option left is quantitative easing."

"I still don't understand."

"Here's how it works. The Fed creates money that didn't exist before and uses it to buy up assets from commercial banks, such as long-term Treasuries or mortgage-backed securities. This not only pumps money into the economy, but it causes long-term interest rates to fall further. That gives investors more incentive to spend and invest."



"Well, maybe it is because it's so much harder to get loans, thanks to the Dodd-Frank financial reform bill. Besides, don't you mean business owners are too terrified to borrow, invest and hire? Every day, there are lots of new regulations they have to comply with. The costs of ObamaCare are causing them to lay off workers or use only part-timers. The deficit and rapidly growing debt are out of control, yet Americans just voted for more spending."



"Now, now, young man, the Consumer Price Index shows that inflation is modest."

"But the Consumer Price Index leaves food and gas out of its calculation! Look, Mr. Johnson, I am only a sixth-grader, but it is awfully frightening that our country's spending is so much more than our income."

"Such a worrier you are."


"It will all work out fine, young man."

"And isn't all this funny-money stuff really showing that President Obama's big-government policies and spending are hurting the economy so bad that even near-zero interest rates and the creation of billions in new money can't jump-start it? What do you say to that, Mr. Johnson?"

"I say we better create even more new money!"

Tom Purcell, author of "Misadventures of a 1970s Childhood," is a Pittsburgh Tribune Review humor columnist and is nationally syndicated exclusively by Cagle Cartoons newspaper syndicate. Email Tom at

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The Summit Daily Updated Nov 19, 2012 09:41PM Published Nov 19, 2012 09:40PM Copyright 2012 The Summit Daily. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.