Monday, January 12, 2009

Why do people say a Fed interest rate cut is printing money?

(My Original Blog Post: http://www.latesttrendsguide.com/?p=2078)
interest rate cut
When the Fed cuts its rate, people say it is printing money. I realize printing money is a metaphor for increasing the money supply, but why does cutting the interest rate increase the money supply? And how do they figure out exactly how much? Like, they'll say, the fed injected 41 billion dollars (whatever) into the money supply, something like that, but they'll relate that to the interest rate cut.

By: punstress

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