<p>I think you are confusing things here. The money supply will not be affected by your transaction. If I pay you with Dollars for Bitcoin, it will simply move the Dollars from my bank account to your bank account. There is still the same amount of Dollars outstanding, just owned by a different person. At a minimum, you need another step in your causal chain. I guess it has to do with your distinction between foreigners versus Americans. But why would a foreigner be willing to accept Dollars if they would not be willing to hold them (or buy something with them). So it would even be hard to construct an argument that it will meaningfully affect money demand.</p>

CC BY-SA 4.0
2022-03-23T21:07:06.490Z
Told you so. https://finance.yahoo.com/news/federal-reserve-powell-new-rules-will-be-needed-for-crypto-190857941.html
Angry Stork
CC BY-SA 4.0
2022-03-24T07:16:10.310Z
@AngryStork What is your point? The linked article does not reference anything international transactions. There is no doubt that cryptocurrency can lead to potentially massive implications for money demand, but your question was explicitly about money supply and an international exchange of assets.
jpfeifer
CC BY-SA 4.0
2022-03-13T17:37:50.297Z
Now I'm even more confused.  If Ying from China sells me some DOGE for 100 bucks I am paying him USD and those dollars are not coming back to the US any time soon.  We may have the same perceived value for a minute until DOGE falls again but in real currency our country has lost $100 hasn't it?
Angry Stork
CC BY-SA 4.0
2022-03-14T12:21:28.693Z
Your confusion is about what it means to pay some foreigner US-Dollars. Say you are paying cash. The 100 dollar bill will now be owned by the foreigner instead of you. But that does not make the bill disappear. It is still held by the public and is still part of the FED's supply of money. Things are similar when paying with deposits. Ying will be holding Dollar deposits formerly owned by you. So nothing has changed from the perspective of money supply. Of course, the transaction you describe may give rise to subsequent transactions that may induce such changes, but they were not part of the OP
jpfeifer
CC BY-SA 4.0
2022-03-14T15:14:30.800Z
so trade deficits are meaningless yeah ok
Angry Stork
CC BY-SA 4.0
2022-03-14T15:45:26.070Z
An exchange of two assets (Bitcoin against Dollar) does not in any way imply a trade deficit.
jpfeifer
CC BY-SA 4.0
2022-03-13T09:07:19.410Z
2022-03-13T09:07:19.410Z
jpfeifer
<p>I would imagine this would act like a trade deficit and the money supply would go down.  If I'm correct there, how does the Fed track these random depletions from the money supply?  If they are leveraged to keep us at 2% inflation and we are losing money they don't know about could it be causing these random spikes in inflation we have been seeing more and more of lately? It seems like the Fed is losing it's grip and I'm looking for answers.</p>

CC BY-SA 4.0
2022-03-23T21:06:29.493Z
https://finance.yahoo.com/news/federal-reserve-powell-new-rules-will-be-needed-for-crypto-190857941.html

The Fed hasn’t made a decision on whether to pursue a CBDC yet, Powell said, though it’s collaborating with other central banks on it.
Angry Stork
CC BY-SA 4.0
2022-03-23T22:52:46.610Z
A central bank digital currency (CBDC) is unrelated to that question.
Alex
CC BY-SA 4.0
2022-03-11T21:12:56.090Z
What do you mean with the FED is losings its grip. If money supply were to go down, it would reduce inflation. Are you worried that the US faces deflationary pressure?
Alex
CC BY-SA 4.0
2022-03-11T21:28:25.403Z
That's pretty much exactly what I mean.  The Fed tries to keep inflation at 2% so they're leveraged forward, especially in a period of lower demand.  If the money supply goes down but they don't account for it, could that actually cause inflation to increase? It's complicated to write out but it feels logical in my mind's eye.
Angry Stork
CC BY-SA 4.0
2022-03-12T16:02:49.640Z
And by Fed losing its grip I mean inflation is not steady
Angry Stork
<inflation><monetary-policy><federal-reserve><cryptocurrency>
If someone from another country mines and sells cryptocurrency to an American for US Dollars what happens to the US money supply?
Angry Stork
# If someone from another country mines and sells cryptocurrency to an American for US Dollars what happens to the US money supply?

(Asked by: username_0 on 2022-03-11)

I would imagine this would act like a trade deficit and the money supply would go down. If I'm correct there, how does the Fed track these random depletions from the money supply? If they are leveraged to keep us at 2% inflation and we are losing money they don't know about could it be causing these random spikes in inflation we have been seeing more and more of lately? It seems like the Fed is losing it's grip and I'm looking for answers.

**Tags:** inflation, monetary-policy, federal-reserve, cryptocurrency
> **Comments:**
> **username_1**: What do you mean with the FED is losings its grip. If money supply were to go down, it would reduce inflation. Are you worried that the US faces deflationary pressure?  
> **username_0**: That's pretty much exactly what I mean.  The Fed tries to keep inflation at 2% so they're leveraged forward, especially in a period of lower demand.  If the money supply goes down but they don't account for it, could that actually cause inflation to increase? It's complicated to write out but it feels logical in my mind's eye.  
> **username_0**: And by Fed losing its grip I mean inflation is not steady  
> **username_0**: https://finance.yahoo.com/news/federal-reserve-powell-new-rules-will-be-needed-for-crypto-190857941.html  The Fed hasn’t made a decision on whether to pursue a CBDC yet, Powell said, though it’s collaborating with other central banks on it.  
> **username_1**: A central bank digital currency (CBDC) is unrelated to that question.  

---

## 1 answers

### Answer by username_2 on 2022-03-13. Score: 0

I think you are confusing things here. The money supply will not be affected by your transaction. If I pay you with Dollars for Bitcoin, it will simply move the Dollars from my bank account to your bank account. There is still the same amount of Dollars outstanding, just owned by a different person. At a minimum, you need another step in your causal chain. I guess it has to do with your distinction between foreigners versus Americans. But why would a foreigner be willing to accept Dollars if they would not be willing to hold them (or buy something with them). So it would even be hard to construct an argument that it will meaningfully affect money demand.

> **Comments:**
> **username_0**: Now I'm even more confused.  If Ying from China sells me some DOGE for 100 bucks I am paying him USD and those dollars are not coming back to the US any time soon.  We may have the same perceived value for a minute until DOGE falls again but in real currency our country has lost $100 hasn't it?  
> **username_2**: Your confusion is about what it means to pay some foreigner US-Dollars. Say you are paying cash. The 100 dollar bill will now be owned by the foreigner instead of you. But that does not make the bill disappear. It is still held by the public and is still part of the FED's supply of money. Things are similar when paying with deposits. Ying will be holding Dollar deposits formerly owned by you. So nothing has changed from the perspective of money supply. Of course, the transaction you describe may give rise to subsequent transactions that may induce such changes, but they were not part of the OP  
> **username_0**: so trade deficits are meaningless yeah ok  
> **username_2**: An exchange of two assets (Bitcoin against Dollar) does not in any way imply a trade deficit.  
> **username_0**: Told you so. https://finance.yahoo.com/news/federal-reserve-powell-new-rules-will-be-needed-for-crypto-190857941.html  
> **username_2**: @AngryStork What is your point? The linked article does not reference anything international transactions. There is no doubt that cryptocurrency can lead to potentially massive implications for money demand, but your question was explicitly about money supply and an international exchange of assets.  

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