Postscript

As a postscript to my post "There's No Such Thing as a Private Sector US Dollar", I'd like to share with all of you a question that I received from a person who is trying to understand banking operations:

"When banks make loans, you say that they denominate or 'peg' their IOUs to the US dollar. Does that mean those IOUs become US dollars?"

Good question and the answer is no. The IOUs remain IOUs. They are only denominated in US dollars and never become US dollars. The "pegging" has the effect of making them "behave" or "act" like US dollars - better said, they act as money in the private sector. When you pay back that bank "loan", the IOUs (money) that were created in the initial transaction are then destroyed. At no point do bank loans ever involve actual US dollars lent out and at no point do bank IOUs become US dollars.

There's no such thing as a private sector US dollar.

If at any time you have a question for me, feel free to ask on Twitter @elliswinningham or on Facebook.