How The Evil Federal Reserve REALLY Works

[superfoodist]

I did not write this, but this is BY FAR the best and easiest to understand description of the Federal Reserve that I have ever read.

Mod note: I have removed the text of this article due to copyright issues. As far as I can determine, the original can be found here: Amazon.com: K.C.'s review of Audio - THE CREATURE FROM JEKYLL ISLAND - ...
-- Criseyde

[SnerpGoodWord]

Your "article" is full of gross errors. Utter failure.

[Solipsist]

Originally Posted by SnerpGoodWord

Your "article" is full of gross errors. Utter failure.

I wouldn't say it is full of errors, but it is most certainly biased, and so unfit as a basis for serious discussion.

[SnerpGoodWord]

Originally Posted by Solipsist

I wouldn't say it is full of errors, but it is most certainly biased, and so unfit as a basis for serious discussion.

Nah, they're errors. Line one claims that the federal reserve is a "Ponzi scheme". That's just false - the Fed is a central bank. A Ponzi scheme is a form of fraudulent investment. They're not even vaguely related other than that both involve money.

The very first line is a straight up, no questions error. It gets no better from there.

[superfoodist]

It's unfortunate that the only thing you pointed out in this article is the only thing that's completely insignificant. Who cares about what "scheme" he compares it to? The information in the body of text is completely accurate, and because you find one small part that doesn't matter, you disqualify the rest.

I understand that this is a scary concept, but please bring yourself to accept it and overcome your fears. That's the only way we can truly make change my friend.

[Solipsist]

Originally Posted by superfoodist

It's unfortunate that the only thing you pointed out in this article is the only thing that's completely insignificant. Who cares about what "scheme" he compares it to? The information in the body of text is completely accurate, and because you find one small part that doesn't matter, you disqualify the rest.

I understand that this is a scary concept, but please bring yourself to accept it and overcome your fears. That's the only way we can truly make change my friend.

superfoodist, there's something here that you're missing. You never going to convince anyone of anything, when your basis of argumentation is an article loaded with biased conclusions.

Look, I want to dissolve the Fed as much as anyone, and I'm not going to disagree with the conclusions of the article, but that's because I've already come to those conclusions, myself. But, in the process of discussion and debate, you have to let others draw their own conclusions, based simply on facts. The article isn't fact, but rhetoric, at best, and simply doesn't serve as an adequate basis of discussion.

[SnerpGoodWord]

Originally Posted by superfoodist

It's unfortunate that the only thing you pointed out...

OK, fine. We got one sentence in and found one glaring error. Let's move on to sentence #2:

First, it is not "federal".

There's error number two. The Federal Reserve is in fact federal - it's created by federal law passed by congress (the Federal Reserve Act, the text of which you can easily find by googling). It's governors are appointed by the president and confirmed by the Senate. That's as federal as you can get.

Two sentences, two glaring factual errors. You want to place a bet on how factual sentence #3 is going to be? Because I can keep pointing out the errors all day long, and that article contains them at about the maximum rate possible in English. It would actually be hard to be wronger.

[superfoodist]

Federal Express is also federal in the sense that it's used by the entire country, but it doesn't make it a public federal company, it's privately owned.

[Brutha]

It is a private corporation owned by a handful of individuals.

That word is a good indication that you don't know how the Fed works. The Fed isn't a single organisation but system of multiple organisations.
Please read the Wikipedia article.

I know the setup is complicated to understand. If you want to be a conspiracy theorist you might even belief that it's intentionally set up in a way. If you want to categorize everything into clear categories like public and private won't understand the system.

It has been exempted from the Freedom Of Information Act

Large parts of the CIA are also exempted from the Freedom Of Information Act. That doesn't make them private.

Federal Express is also federal in the sense that it's used by the entire country, but it doesn't make it a public federal company, it's privately owned.

From the Wikipedia article: In 2009, the Federal Reserve Banks distributed $1.4 billion in dividends to member banks and returned $47 billion to the U.S. Treasury.[74].
That's not the way a private corporation deal with it's profits. Private corporations don't give simply 95% of their profits to the government.

[SnerpGoodWord]

Originally Posted by superfoodist

Federal Express is also federal in the sense that it's used by the entire country, but it doesn't make it a public federal company, it's privately owned.

A nonsensical argument. The Federal Reserve is not "federal" because it has federal in its name or because it's used by the entire country (which isn't really even true - only member banks can do business with the Fed). It is federal because it is created by federal law, and is goverened by individuals appointed and confirmed by the branches of the federal government. Neither is true of Federal Express.

[superfoodist]

That's not the way a private corporation deal with it's profits. Private corporations don't give simply 95% of their profits to the government.

It didn't "just give" 95% of its profits to the government. It gives money to the government with INTEREST, that the government can never pay off.

You guys are intelligent, but this system is made to appear intelligent, and made to appeal to the intelligent in a linear way so that it isn't questioned. Please don't just believe what's presented on the surface. The Federal Reserve is indeed an evil central bank that's controlling the world.

The fact alone that they PRINT our money, and LOAN IT with INTEREST to our country is all that has to be said.

If I loaned you 1$, but expected 2$ back, and I'm the only one that makes money, how would you EVER pay back the extra 1$? Well, you'd try and loan MORE money to pay off your debt.. So then I'd give you 5$.. But since I gave you that 5$, you now owe me 10$... Can't you see? It's IMPOSSIBLE to pay back. The economy is DESIGNED to be a downward spiral. Unless the Federal Reserve is abolished, nothing will EVER be fixed, and things will continue to get worse, through war, poverty, and greed.

As far as I'm concerned, that's all that needs to be said. I won't be replying to anymore comments on this post that tries to ignore the simple fact that has just been laid out.

Please open your eyes and see what's happening people.

[SnerpGoodWord]

Originally Posted by superfoodist

The fact alone that they PRINT our money, and LOAN IT with INTEREST to our country is all that has to be said.

The Fed does not print US money. The US Bureau of Engraving and Printing (a department of the US Treasury) does. I've taken the tour and watched them do it. It's pretty cool actually

The reason no one is taking what you're saying seriously is because the things you say keep being factually wrong.

[superfoodist]

The Fed does not print US money. The US Bureau of Engraving and Printing (a department of the US Treasury) does. I've taken the tour and watched them do it. It's pretty cool actually

The reason no one is taking what you're saying seriously is because the things you say keep being factually wrong.

"The Federal Reserve orders new currency from the Bureau of Engraving and Printing, which produces the appropriate denominations and ships them directly to the Reserve Banks."

Please don't get too caught up in minor details, look at the big picture here. I'm opting out for real this time. Just had to post that so that people didn't see your comment and automatically assume your right. The Federal Reserve still assumes ultimate control of all US money.

[SnerpGoodWord]

Originally Posted by superfoodist

Please don't get too caught up in minor details...

When the details are wrong in pretty much everything you say, it becomes impossible to look at the big picture. A sound argument has to start from factual or at least reasonable premises, not obvious errors.

[Gabo]

I'd like to address one thing that superfoodist hit upon, and that is the debt-generating nature of our fiat money system. All our money is commissioned by the Federal Reserve, and it enters the economy through systems that charge interest (such as loaning money to banks or buying treasury bonds). Since the Fed is the only source for money creation, and the money they lend always charges interest, then the more money the Fed creates, the more debt is created. Furthermore, there is no possible way for the sum total of money loaned by the Fed to ever be payed back, since the total amount owed once interest accumulates is necessarily higher than the total amount borrowed.

I would argue that if our country is going to use a fiat money system, we should not create the money as debt in the first place, but rather use it as a neutral tool to keep track of the value exchanged between goods and services in the marketplace.

[Brutha]

It didn't "just give" 95% of its profits to the government. It gives money to the government with INTEREST, that the government can never pay off.

No, you don't understand how it works.
The Fed loans the government money at interest.
The government pays back some of that money. The Fed uses some of it's money for it's daily operation to pay salaries for the employees, buy equipment etc. At the same time Fed makes a profit.

From the profit those 1.4 billion go to the member banks (1.4 billion equals 6% of the amount that those banks payed when they first brought something like Fed shares).
The rest of the profit goes straight to the US treasury.

Look, I'm no fan of the US Fed. If you however want to critize it intelligently you have to understand the way it works.

[Spinoza]

Originally Posted by Brutha

No, you don't understand how it works.
The Fed loans the government money at interest.
The government pays back some of that money. The Fed uses some of it's money for it's daily operation to pay salaries for the employees, buy equipment etc. At the same time Fed makes a profit.

From the profit those 1.4 billion go to the member banks (1.4 billion equals 6% of the amount that those banks payed when they first brought something like Fed shares).
The rest of the profit goes straight to the US treasury.

Look, I'm no fan of the US Fed. If you however want to critize it intelligently you have to understand the way it works.

You say your no fan of the US Fed. What in your mind are they doing wrong and what would you do differently or what would you replace them with?

[Spinoza]

Delete

[SnerpGoodWord]

Originally Posted by Gabo

All our money is commissioned by the Federal Reserve, and it enters the economy through systems that charge interest (such as loaning money to banks or buying treasury bonds).

This is not true. Physical dollars leave the Fed five ways:
1) purchasing bonds (typically T-bonds) or other assets with a yield
2) purchasing other assets which do not have an associated yield
3) paying dividends to fed member banks
4) Fed salaries and other direct expenses
5) Fed profits returned to the Treasury

2,3 and 4 are trivial in size.

IN other words any money "made" by the Fed through interest on 1) is returned to the system through 5). In essence, the Fed gives the Treasury a rebate on all the interest on T-bonds held by the Fed.

Once you acknowledge these facts, all the wingnut "the Fed causes debt" arguments are obviously absurd. The reason the US national debt grows is because congress spends more money than the Treasury takes in. That's not caused by the Fed.

[Gabo]

Originally Posted by SnerpGoodWord

IN other words any money "made" by the Fed through interest on 1) is returned to the system through 5). In essence, the Fed gives the Treasury a rebate on all the interest on T-bonds held by the Fed.

Once you acknowledge these facts, all the wingnut "the Fed causes debt" arguments are obviously absurd. The reason the US national debt grows is because congress spends more money than the Treasury takes in. That's not caused by the Fed.

Interesting. I had never heard this before today.

Why make the money at interest in the first place if the interest charged is going to be given back to the Treasury? Seems like a pointless game of hot potato to me.

[Solipsist]

Originally Posted by SnerpGoodWord

IN other words any money "made" by the Fed through interest on 1) is returned to the system through 5).

This a gross error. Utter failure.

According to Wikipedia,

The U.S. Government receives all of the system's annual profits, after a statutory dividend of 6% on member banks' capital investment is paid, and an account surplus is maintained. In 2010, the Federal Reserve made a profit of $82 billion and transferred $79 billion to the U.S. Treasury

What is returned to the U.S. Treasury (if any) is in excess of their 6% take.

[SnerpGoodWord]

Originally Posted by Solipsist

This a gross error. Utter failure.

According to Wikipedia,

What is returned to the U.S. Treasury (if any) is in excess of their 6% take.

I'm sorry, you clearly lack the ability to follow the posts in your own thread. Everyone but you understands what's going on here.

[Solipsist]

Originally Posted by SnerpGoodWord

I'm sorry, you clearly lack the ability to follow the posts in your own thread. Everyone but you understands what's going on here.

Not my thread.

Once again, a gross error. Utter failure.

[SnerpGoodWord]

Originally Posted by Gabo

Interesting. I had never heard this before today.

Why make the money at interest in the first place if the interest charged is going to be given back to the Treasury? Seems like a pointless game of hot potato to me.

The reason is that the T-bonds in question are written for the broader market, and then some fraction of them may be bought by the Fed at a later date depending on what the Fed wants to do to the money supply.

So the bonds have a standard coupon rate, but if they end up in the Fed's hands the Treasury effectively gets the coupon payments back.

[SnerpGoodWord]

Originally Posted by Solipsist

Not my thread.

Once again, a gross error. Utter failure.

Just your errors. Got it

You do realize what you called the "6% take"
a) has NOTHING to do with Fed assets - it would be paid even if the Fed held no assets. It's 6% on member bank's capital contributions to the Fed, which are small.
and
b) is tiny compared to what's refunded to the Treasury
right?

[Solipsist]

Originally Posted by SnerpGoodWord

Just your errors. Got it

You do realize what you called the "6% take"
a) has NOTHING to do with Fed assets - it would be paid even if the Fed held no assets. It's 6% on member bank's capital contributions to the Fed, which are small.
and
b) is tiny compared to what's refunded to the Treasury
right?

I guess I have to quote it again...

The U.S. Government receives all of the system's annual profits, after a statutory dividend of 6% on member banks' capital investment is paid, and an account surplus is maintained. In 2010, the Federal Reserve made a profit of $82 billion and transferred $79 billion to the U.S. Treasury

Yes, I suppose $82 billion is "tiny" compared to $79 billion....not.

[SnerpGoodWord]

Originally Posted by Solipsist

I guess I have to quote it again...
Yes, I suppose $82 billion is "tiny" compared to $79 billion....not.

You're still missing the point. Their profit was 82B of which 79B of that went to the treasury. The other 3B was sallary, dividends to member banks, other asset purchases, and probably some rounding errors given that we didn't keep the tenths place.

Had you actually bothered to read the thread, you'd know the dividend is about 1.5B

So in other words, you didn't pay attention and as a result have no clue what you're talking about.

[Solipsist]

Originally Posted by SnerpGoodWord

You're still missing the point. Their profit was 82B of which 79B of that went to the treasury. The other 3B was sallary, dividends to member banks, other asset purchases, and probably some rounding errors given that we didn't keep the tenths place.

Had you actually bothered to read the thread, you'd know the dividend is about 1.5B

So in other words, you didn't pay attention and as a result have no clue what you're talking about.

Very well, I stand corrected, and will, for any possible further discussion, will include the post that corrects me..

Originally Posted by Brutha

No, you don't understand how it works.
The Fed loans the government money at interest.
The government pays back some of that money. The Fed uses some of it's money for it's daily operation to pay salaries for the employees, buy equipment etc. At the same time Fed makes a profit.

From the profit those 1.4 billion go to the member banks (1.4 billion equals 6% of the amount that those banks payed when they first brought something like Fed shares).
The rest of the profit goes straight to the US treasury.

(Nice summary, btw)

However, I'll have you note that my initial response was to your post, in which you said ...

Originally Posted by SnerpGoodWord

Physical dollars leave the Fed five ways:
1) purchasing bonds (typically T-bonds) or other assets with a yield
2) purchasing other assets which do not have an associated yield
3) paying dividends to fed member banks
4) Fed salaries and other direct expenses
5) Fed profits returned to the Treasury

2,3 and 4 are trivial in size.

IN other words any money "made" by the Fed through interest on 1) is returned to the system through 5). In essence, the Fed gives the Treasury a rebate on all the interest on T-bonds held by the Fed.

A $1.4 billion profit belies "any" and "all" concepts you propose here.

In all honesty, I wouldn't have responded at all, had it not been for the blatant arrogance you exhibit in comments like these...
Once you acknowledge these facts, all the wingnut "the Fed causes debt" arguments are obviously absurd. The reason the US national debt grows is because congress spends more money than the Treasury takes in. That's not caused by the Fed.[/QUOTE]I can only speak for myself, but I've never in my life asserted that the "Fed causes debt." I have always only reminded people that that the U.S. Dollar is fundamentally a debt instrument, not hard currency, for it is not backed by any tangible assets. But, according to you, anyone making this assertion is simply a "wingnut," making "gross errors," and "utter failures". Such language reveals a blatant arrogance that I find highly irritating, and would simply put you on permanent "ignore", if that option were available to me.

Lastly, there's this--

Originally Posted by SnerpGoodWord

I'm sorry, you clearly lack the ability to follow the posts in your own thread. Everyone but you understands what's going on here.

I shouldn't have to remind you that this is not my thread. And if you weren't paying attention to that, that's okay. But to criticize me for missing something, while you, yourself, are missing something is called hypocrisy, which, in your case, is exceeded only by your arrogance.

And with that, I bid you good day.

[SnerpGoodWord]

It's not my problem you have no grasp whatsoever of the facts of the matter. You really need to study, THEN write, rather than pretending to be an expert on topics which you know nothing about.

[Brutha]

A $1.4 billion profit belies "any" and "all" concepts you propose here.

Those $1.4 billion are money that Snerp mentioned under 3): "paying dividends to fed member banks"

$1.4 billion isn't "nothing" but much more money flows through 1) and 5).
In a perfect world I don't think those $1.4 billion should be payed to the banks but it's not a sum of money that's a really big deal.

You say your no fan of the US Fed. What in your mind are they doing wrong and what would you do differently or what would you replace them with?

I don't want to explore all the points in this thread. I have written about them in the past on this forum.
A simple solution that would be to replace the current US central bank with something that looks like the pre-Euro Bundesbank with the transparency rules of the Japanese central bank.