Would anyone like to tell me

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Why the treasury buys government Bonds can not increase any money supply ?
 
When the treasury buys US Gov't Bonds it is giving the money back to its bondholders therefore increasing the money supply. When the treasury buys say U.K. Gov't bonds it is a bondholder and giving the money to the U.K gov't and therefore taking money out fo the money supply. I think this is what you were asking.
 
Why would it? The treasury would just be spending circulating dollars on bonds instead of bombs. When I buy bonds it doesn't increase the money supply.
 
bigwilly Wrote:
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> When the treasury buys US Gov't Bonds it is giving
> the money back to its bondholders therefore
> increasing the money supply. When the treasury
> buys say U.K. Gov't bonds it is a bondholder and
> giving the money to the U.K gov't and therefore
> taking money out fo the money supply. I think
> this is what you were asking.

Nope - the Fed conducting open market operations is decidedly different from the Treasury buying bonds.
 
It doesn't increase the money supply because the Treasury is giving their money (that they borrowed) back to the lender. No new money is created. Take a simple example, you lend $10 to your friend, and he pays you back in a week...Did an additional $10 get created? No...Only the Fed can increase/decrease the money supply via decreasing/increasing bank reserves and buying/selling Treasuries.
 
If the government has the huge tax revenue , and than use this money to buy bonds ,

what affect to the money supply ?

Or they will not buy bonds use tax revenue ?
 
vc Wrote:
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> If the government has the huge tax revenue , and
> than use this money to buy bonds ,
>
> what affect to the money supply ?


No effect, but would be unusual policy.
>
> Or they will not buy bonds use tax revenue ?

They will not buy bonds. They will declare war on some other Islamic country.
 
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