4 ms·

If money flows from one part of the government to another, there is no reason why it wouldn't flow through private banks. The government isn't one monolithic ag

by bobbyi 17y ago

If money flows from one part of the government to another, there is no reason why it wouldn't flow through private banks. The government isn't one monolithic agent with a single (overdrawn) checking account. Whether you count the Fed as being within "the government" is a complex issue but ultimately it is just semantics and doesn't change the nature of the situation. They are in a grey area with some private and some public characteristics, like the post office.

DougWebb 17y ago
Shady maybe, but not grey. The Federal Reserve Bank is a privately owned and operated corporation. It is not in any way a part of the US government; it is given special rights by our government to manage our banking system as a monopoly. The Fed Chairman is appointed by the CEOs of the regional Fed banks, and the CEOs are appointed by the shareholders of those banks. There are no elected representatives running the Fed, nor any political appointees selected by the Executive branch. There /is/ a lot of oversight, and the Fed chairman is required to spend a lot of time dealing with the president and congress. However, all Fed meetings, particularly policy-setting meetings, are private and hidden from the public and US government. No government agency is allowed to do that; even the most top-secret black projects of the CIA and DoD are ultimately overseen by someone in Congress, at least to some extent. (Congress could stop funding these projects, as a final control. They can't do that to the Fed.) The government agency you're thinking of is the Treasury. It is the Treasury's job to produce and manage US currency, as directed by Congress. Congress had done a lousy job of setting economic policy, so back in 1913 Congress decided to outsource the job to a private corporation: the Fed. The Treasury still makes all of our coins, but the paper money and 'accounting' money were given to the Fed. This wouldn't necessarily be bad, except the Fed effectively charges the government a fee for every dollar put into circulation; $1 of circulating currency is added to the economy, but $1.05 in debt is added at the same time. That doesn't balance, so the currency has to be inflated to make it balance; the value of $1.05 has to be reduced to the value of $1 in order for the originally created $1 to be sufficient to pay it back. Except that $1 is now worth only $0.95 if used for any other purpose. This is a very, very rough and inaccurate description of the situation, but the basic premise is correct: the Fed is a private company that makes a profit by lending money into the US economy at a rate that can't be paid for using the money that's been lent into the economy. This allows the Fed and its shareholders to slowly draw all of the wealth out of the US economy, leading to the highly concentrated wealth in the hands of very few very rich people we have today.
- bobbyi 17y ago
  The Federal Reserve System is run by a Board of Governors. The Governors are appointed by the President. They must be confirmed by the Senate. The Board of Governors is accountable to the House of Representatives and must give them an annual report of the Fed's operations. If the Federal Reserve System were private, then the people who govern it would ultimately be accountable to private shareholders and not to Congress who represent the People. However, the individual member banks are private, which is why it is a grey area. Much of the confusion comes from the fact that "the Fed" can be used to mean the Federal Reserve System as a whole or the Board of Governors ("the Fed decided to raise interest rates") or the member banks depending on the context.
- encoderer 17y ago
  There are so many inaccuracies here that it can only be described as "fiction." 1. You often mix The Fed with the Board of Governors of the Fed. These are distinct. And the Board of Governers is definitely part of the government. It's an independent agency. Other indy agencies? NASA. The CIA. EPA. FEC. FCC. Dozens of them. 2. The Fed Chairman is part of the Board of Governors. All of them are appointed by the President and confirmed by the Senate. Definitely not appointed by the "CEOs of the regional Fed banks." There is a term limit. And one of those Governors is appointed (again, by the Prez, and confirmed by the Senate) to be Chairman. 3. New paper notes are created when the Fed purchases T-bills from the Tres. Dept. Yes, the Gov't pays interest on these notes. And yes, that is in general the mechanism of inflation. But it is _nowhere near_ the 5% you cited. And yes, that makes a very big deal. At no time is the value of money controlled by anybody enough that they could just will it to be reduced. And it's very easy to rail on Inflation when you don't concede that deflation would cause even more fiduciary problems. Inflation is worst for lenders. Deflation is worst for debtors. There are for more debtors in my family than there are lenders. How about yours? 4. The federal reserve is not the source of concentrated wealth in this country. Wealth was far more concentrated during the "free banking era" in the 19th century when there was no federal central bank. It's easy to riff on this stuff. Easy to bash big biz and big gov't. And they have serious flaws. But if our Government is going to borrow money to fund it's operation, I'd rather it borrows 90% of that debt from our own banks (eg The Fed) than from foreign banks. People act like China funds our debt. No. The Fed does. Our biggest lender is ourselves. I'll take that over the opposite. It could be reformed, though. And the House banking reform bill passed a few days ago is a good start. Not nearly good enough, but a good start.

by bobbyi 17y ago

DougWebb 17y ago

Shady maybe, but not grey. The Federal Reserve Bank is a privately owned and operated corporation. It is not in any way a part of the US government; it is given special rights by our government to manage our banking system as a monopoly. The Fed Chairman is appointed by the CEOs of the regional Fed banks, and the CEOs are appointed by the shareholders of those banks. There are no elected representatives running the Fed, nor any political appointees selected by the Executive branch. There /is/ a lot of oversight, and the Fed chairman is required to spend a lot of time dealing with the president and congress. However, all Fed meetings, particularly policy-setting meetings, are private and hidden from the public and US government. No government agency is allowed to do that; even the most top-secret black projects of the CIA and DoD are ultimately overseen by someone in Congress, at least to some extent. (Congress could stop funding these projects, as a final control. They can't do that to the Fed.) The government agency you're thinking of is the Treasury. It is the Treasury's job to produce and manage US currency, as directed by Congress. Congress had done a lousy job of setting economic policy, so back in 1913 Congress decided to outsource the job to a private corporation: the Fed. The Treasury still makes all of our coins, but the paper money and 'accounting' money were given to the Fed. This wouldn't necessarily be bad, except the Fed effectively charges the government a fee for every dollar put into circulation; $1 of circulating currency is added to the economy, but $1.05 in debt is added at the same time. That doesn't balance, so the currency has to be inflated to make it balance; the value of $1.05 has to be reduced to the value of $1 in order for the originally created $1 to be sufficient to pay it back. Except that $1 is now worth only $0.95 if used for any other purpose. This is a very, very rough and inaccurate description of the situation, but the basic premise is correct: the Fed is a private company that makes a profit by lending money into the US economy at a rate that can't be paid for using the money that's been lent into the economy. This allows the Fed and its shareholders to slowly draw all of the wealth out of the US economy, leading to the highly concentrated wealth in the hands of very few very rich people we have today.

bobbyi 17y ago
The Federal Reserve System is run by a Board of Governors. The Governors are appointed by the President. They must be confirmed by the Senate. The Board of Governors is accountable to the House of Representatives and must give them an annual report of the Fed's operations. If the Federal Reserve System were private, then the people who govern it would ultimately be accountable to private shareholders and not to Congress who represent the People. However, the individual member banks are private, which is why it is a grey area. Much of the confusion comes from the fact that "the Fed" can be used to mean the Federal Reserve System as a whole or the Board of Governors ("the Fed decided to raise interest rates") or the member banks depending on the context.
encoderer 17y ago
There are so many inaccuracies here that it can only be described as "fiction." 1. You often mix The Fed with the Board of Governors of the Fed. These are distinct. And the Board of Governers is definitely part of the government. It's an independent agency. Other indy agencies? NASA. The CIA. EPA. FEC. FCC. Dozens of them. 2. The Fed Chairman is part of the Board of Governors. All of them are appointed by the President and confirmed by the Senate. Definitely not appointed by the "CEOs of the regional Fed banks." There is a term limit. And one of those Governors is appointed (again, by the Prez, and confirmed by the Senate) to be Chairman. 3. New paper notes are created when the Fed purchases T-bills from the Tres. Dept. Yes, the Gov't pays interest on these notes. And yes, that is in general the mechanism of inflation. But it is _nowhere near_ the 5% you cited. And yes, that makes a very big deal. At no time is the value of money controlled by anybody enough that they could just will it to be reduced. And it's very easy to rail on Inflation when you don't concede that deflation would cause even more fiduciary problems. Inflation is worst for lenders. Deflation is worst for debtors. There are for more debtors in my family than there are lenders. How about yours? 4. The federal reserve is not the source of concentrated wealth in this country. Wealth was far more concentrated during the "free banking era" in the 19th century when there was no federal central bank. It's easy to riff on this stuff. Easy to bash big biz and big gov't. And they have serious flaws. But if our Government is going to borrow money to fund it's operation, I'd rather it borrows 90% of that debt from our own banks (eg The Fed) than from foreign banks. People act like China funds our debt. No. The Fed does. Our biggest lender is ourselves. I'll take that over the opposite. It could be reformed, though. And the House banking reform bill passed a few days ago is a good start. Not nearly good enough, but a good start.