Tesla CEO Elon Musk released a firestorm on social media last week, claiming to expose what he calls “the biggest financial scam nobody talks about.” His target? The Federal Reserve‘s ability to create money electronically with seemingly minimal oversight.
Musk’s tweets highlighted how the Fed doesn’t actually print physical bills—that’s the Treasury Department’s job. Instead, they create digital currency through open market operations and quantitative easing. These mechanisms have expanded the Fed’s balance sheet by trillions since 2008. Not exactly pocket change.
“They’re making money out of thin air while the average person works their life away,” Musk wrote to his 150 million followers. The post quickly went viral, with finance experts weighing in from all sides.
The controversy centers around fractional reserve banking, where banks only keep a fraction of deposits on hand. The rest? Loaned out, creating more money in the process. Banks fundamentally conjure loans from deposits that didn’t exist before. Magic trick or legalized ponzi scheme? Depends who you ask.
Musk specifically called attention to central bank digital currencies (CBDCs) being developed worldwide. China’s already testing its digital yuan. The Fed’s researching a digital dollar. These technologies could give governments unprecedented control over monetary policy—and your financial privacy.
Financial experts were quick to point out that Musk oversimplified complex monetary systems. The Fed uses multiple tools—federal funds rate, discount rate, reserve requirements—to manage the money supply. It’s not just pressing a button labeled “create money.”
Critics of Musk noted that Treasury bonds finance government deficit spending, not direct money printing. But when the Fed purchases those bonds? The money supply expands. Six of one, half dozen of another.
The actual physical currency notes that do exist are produced by the Bureau of Engraving and Printing at an average cost of 10 cents per note, according to their 2013 production statistics.
The Federal Reserve’s monetary policy decisions are made by the Federal Open Market Committee, which sets target interest rates based on economic conditions rather than simply printing currency at will.
Meanwhile, cryptocurrencies and blockchain technologies offer alternatives to government-controlled money. Unlike fiat currencies that originated centuries ago, cryptocurrency technology emerged only in 2009 with the introduction of Bitcoin. Ironic, considering Musk’s own hot-and-cold relationship with Bitcoin.
Love him or hate him, Musk has once again thrust complex financial topics into mainstream conversation. Whether that leads to better understanding or more confusion remains to be seen.
