Why is the Federal Reserve bad?

[PattyLee loves dogs]

I really think the Fed helps control inflation

The Fed IS inflation... before 1913 shady characters had a heck of time even getting a small percentage away from gold before there were runs on the banks and reality snapped back into shape. That's why they brought in Warburg from Germany to create the Fed: to escape the limits that gold put on theft.

Look at the value of the dollar since 1913. (Voice of John Cleese) Loook at the booones... it's a nasty, vile vicious creature I tell ya.

(Perhaps you are thinking of a currency board, as used by pre-takeover Hong Kong?)

[John Edward Mercier]

The US Historical Inflation Rate will show that even during the time of the gold standard... price stability was non-existant. The Fed was enacted to bring price stability, for the poor (middle class at the time did not for the most part exist). The data after the enactment of the Fed will show price stability, but inflation.
Was this due to the abolishment of the Gold Standard? Enactment of the Personal Income Tax? Or increasing congressional deficit spending?
Too many factors to pick one... but the need for taxation is directly related to government spending... and the abolishment of the Gold Standard is due to the desire of government to spend more than they tax.
So I place the burden on congressional spending.

[Ron Helwig]

Somebody posted this on the Liberty Dollar mailing list.

Federal Reserve Timeline

Interesting site. It allows anyone to create their own timelines for anything.

[JohninRI]

On December 23, 1913, the United states Congress, just after holiday recess began, reconvened and passed the Federal Reserve Act.  Congressman Charles Lindbergh, on the floor of Congress, tried to warn the people but to no avail.  He said;

            "This Act establishes the most gigantic trust on earth. ... When the President signs this Act, the invisible government by the  money power,  proven to exist by the Money Trust Investigation,  will be legalized.  ...  The new law will create inflation whenever the Trusts want inflation. ... From now on depression will be scientifically created."

These were his words, but his warning didn't begin to show the depth of what the problem would become.  Long before the Federal Reserve Act, Thomas Jefferson contemplated what a central bank would mean to this Country when he warned;

            "The Central Bank is an institution of the most deadly hostility existing against the principles and from of our Constitution.... I am an enemy to all banks, discounting bills or notes for anything but coin."

                 "If the American People ever allow private banks to control the issue of currency, first by inflation,  then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered."

The Federal Reserve Act as passed by the United States Congress created a private entity which would take complete control over America's Monetary System.  The Federal Reserve notes it would issue with interest and accruing debt, would replace United States Certificates, which were backed by an equal amount in gold or silver and issued interest and debt free.  These Federal Reserve Notes would directly lead to a geometrically progression of the National Debt until the entire economy of the United States of America would no longer produce enough revenue to even pay the annual interest payment on the debt,  never mind the actual debt principle.  In my reading  and studying of the Act, I cannot conceive of any kind of pure motive for Congress to enter into such an endeavor.  The only possible outcome would be exactly what was produced, a massive National Debt with no possible solution for payment.

Let me try to explain why.  Suppose for a moment that the entire world went on a two day holiday weekend; for these two days not one cent changed hands anywhere in the world.  At the end of the holiday weekend there would be exactly the same amount of currency in exactly the same places,  but the entire world would be deeper in debt because of accruing interest payments.  The obvious question is, "Where could we ever get the money to pay the additional interest payments?"  The answer is that we can't, its not possible.  Money is issued in a finite supply, while interest is infinite and geometrically ever growing.  Not one dollar of the interest payment has ever been issued as money because each dollar is itself indebted; so as long as the Federal Reserve Act is in effect and functioning, payment is virtually impossible.

Let me give you one more thing to contemplate.  Suppose for a moment that in 1913 the United States of America borrowed one dollar, $1,  from the Federal Reserve Bank and just for ease and clarity sake,  suppose that the interest rate was 10% per annum and has always remained such.  After 10 years,  we would owe to the Reserve Bank for that original dollar still in circulation about $2.30;   after 20 years, about $6.00;   after 40 years, about $40.00;   after 60 years, about $250.00;   but after 80 years, we would owe the Federal Reserve Bank about $1,200.00 and we would still only have that one dollar, ($1), in circulation.  The Federal reserve Act is right now a little over 80 years old and look at our Country's National Debt.

I'm not saying that the entire Congress was corrupt when the Act was passed.  On the contrary, when you look at how the Federal Reserve Act was written, you can see how Congress could have been sold that the United States might have gotten some benefits from it.  However, I am emphatically stating that to have allowed the Act to continue incurring interest for all these years, uninterrupted, should be construed as a form of treason, against the Country, on the part of these Government Officials.

The Federal Reserve Act provides for a distribution of the earnings, or profits, with the lions share, "94%" going to the United States Federal Government as an excise tax" against the Bank.  Sounds good, huh!  However, this revenue would not be given to the United States Treasury directly, but credited against the ever growing "outstanding bonded indebtedness of the United States.";  in other words,  put toward payment of the accruing National Debt.  The other six percent "6%" would be paid in gold,  yearly, from the various deposits in the Federal Reserve Banks around the Country to the stockholders of these Federal Reserve Banks.

About a year ago, I asked a prominent local stockbroker if he had ever heard of Federal Reserve Stock being sold on the open market.  He told me that he had never thought about it before, but that he had not.  Gee, what a surprise!  Now let me add one more insult to injury.  In 1993, Congress passed the "Omnibus Budget Reconciliation Act."  In Section 7, on page 100, Congress  made the income from this 6% dividend "exempt from federal, State and local taxation."  Now I ask you, "Why would Congress do such a thing?"

[dalebert]

Here's my quick history of the Fed (with apologies to Tolkien):
http://www.strike-the-root.com/62/walker/walker1.html

The "Money Mafia". Hehe. I cackled loudly at that.

"Hyde Island was booked up". You got me again!

[PattyLee loves dogs]

"Hyde Island was booked up". You got me again!

There's still a resort on Jekyll Island... some think tank should book it for a public conference on phasing out the Fed  .

[srqrebel]

Good grief, my head is spinning... and I haven't even read half of what's posted here.

I have a nagging feeling that is just how the Federal Reserve would want it

[PattyLee loves dogs]

Good grief, my head is spinning... and I haven't even read half of what's posted here.

Oh, come on, it isn't rocket science after all. All you have to do is read one good textbook on money and banking history... I review one here:

http://www.lewrockwell.com/walker/walker26.html

It's even available free as a .pdf.

Of course, it's not short    , but it's entertaining and complete. Even Herod and Cleopatra put in cameos.

[mackler]

Here's one:
http://www.amazon.com/Mystery-Banking-Murray-N-Rothbard/dp/0943940044

I haven't read all the books on the Fed, but after reading this one, I really understood the nuts and bolts of how it operates.  Rothbard gives clear examples showing banks' balance sheets at each step of the "creation of money out of nothing" process.

Here's another:
http://www.amazon.com/THEORY-MONEY-CREDIT-LUDWIG-MISES/dp/0913966703

As you might imagine, this one is highly theoretical.  What's most amazing about it is not the way von Mises explains the flaws in and predicts the downfall of the Federal Reserve bank, but rather the fact that he wrote it before the Fed existed!

[KBCraig]

MSNBC "guest expert" fares badly against Ron Paul, re: The Federal Reserve.

http://www.youtube.com/watch?v=mBympCQcyzY

[John Edward Mercier]

On December 23, 1913, the United states Congress, just after holiday recess began, reconvened and passed the Federal Reserve Act.  Congressman Charles Lindbergh, on the floor of Congress, tried to warn the people but to no avail.  He said;

            "This Act establishes the most gigantic trust on earth. ... When the President signs this Act, the invisible government by the  money power,  proven to exist by the Money Trust Investigation,  will be legalized.  ...  The new law will create inflation whenever the Trusts want inflation. ... From now on depression will be scientifically created."

These were his words, but his warning didn't begin to show the depth of what the problem would become.  Long before the Federal Reserve Act, Thomas Jefferson contemplated what a central bank would mean to this Country when he warned;

            "The Central Bank is an institution of the most deadly hostility existing against the principles and from of our Constitution.... I am an enemy to all banks, discounting bills or notes for anything but coin."

                 "If the American People ever allow private banks to control the issue of currency, first by inflation,  then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered."

The Federal Reserve Act as passed by the United States Congress created a private entity which would take complete control over America's Monetary System.  The Federal Reserve notes it would issue with interest and accruing debt, would replace United States Certificates, which were backed by an equal amount in gold or silver and issued interest and debt free.  These Federal Reserve Notes would directly lead to a geometrically progression of the National Debt until the entire economy of the United States of America would no longer produce enough revenue to even pay the annual interest payment on the debt,  never mind the actual debt principle.  In my reading  and studying of the Act, I cannot conceive of any kind of pure motive for Congress to enter into such an endeavor.  The only possible outcome would be exactly what was produced, a massive National Debt with no possible solution for payment.

Let me try to explain why.  Suppose for a moment that the entire world went on a two day holiday weekend; for these two days not one cent changed hands anywhere in the world.  At the end of the holiday weekend there would be exactly the same amount of currency in exactly the same places,  but the entire world would be deeper in debt because of accruing interest payments.  The obvious question is, "Where could we ever get the money to pay the additional interest payments?"  The answer is that we can't, its not possible.  Money is issued in a finite supply, while interest is infinite and geometrically ever growing.  Not one dollar of the interest payment has ever been issued as money because each dollar is itself indebted; so as long as the Federal Reserve Act is in effect and functioning, payment is virtually impossible.

Let me give you one more thing to contemplate.  Suppose for a moment that in 1913 the United States of America borrowed one dollar, $1,  from the Federal Reserve Bank and just for ease and clarity sake,  suppose that the interest rate was 10% per annum and has always remained such.  After 10 years,  we would owe to the Reserve Bank for that original dollar still in circulation about $2.30;   after 20 years, about $6.00;   after 40 years, about $40.00;   after 60 years, about $250.00;   but after 80 years, we would owe the Federal Reserve Bank about $1,200.00 and we would still only have that one dollar, ($1), in circulation.  The Federal reserve Act is right now a little over 80 years old and look at our Country's National Debt.

I'm not saying that the entire Congress was corrupt when the Act was passed.  On the contrary, when you look at how the Federal Reserve Act was written, you can see how Congress could have been sold that the United States might have gotten some benefits from it.  However, I am emphatically stating that to have allowed the Act to continue incurring interest for all these years, uninterrupted, should be construed as a form of treason, against the Country, on the part of these Government Officials.

The Federal Reserve Act provides for a distribution of the earnings, or profits, with the lions share, "94%" going to the United States Federal Government as an excise tax" against the Bank.  Sounds good, huh!  However, this revenue would not be given to the United States Treasury directly, but credited against the ever growing "outstanding bonded indebtedness of the United States.";  in other words,  put toward payment of the accruing National Debt.  The other six percent "6%" would be paid in gold,  yearly, from the various deposits in the Federal Reserve Banks around the Country to the stockholders of these Federal Reserve Banks.

About a year ago, I asked a prominent local stockbroker if he had ever heard of Federal Reserve Stock being sold on the open market.  He told me that he had never thought about it before, but that he had not.  Gee, what a surprise!  Now let me add one more insult to injury.  In 1993, Congress passed the "Omnibus Budget Reconciliation Act."  In Section 7, on page 100, Congress  made the income from this 6% dividend "exempt from federal, State and local taxation."  Now I ask you, "Why would Congress do such a thing?"

No public, nor private, corporation allows the US President to nominate... and the US Congress to appoint it officers. The stockholders of the various federal reserve banks have no say in this process outside the one that is open to any citizen of the US.
Secondly, I have never been paid any dividend in gold... and I own holdings is several of these banks.

[JohninRI]

Secondly, I have never been paid any dividend in gold... and I own holdings is several of these banks.

John,
I wrote this 13 years ago in 1995 and I was looking at the original Act when I did. I don't know where I put it but I'll try to find it.  More than likely the act changed when we ran out of gold and could no longer pay that high amount out of our reserves.

I notice that you didn't comment on the dividends being tax exempt.  Do you think that this "profit from any source derived" should be tax exempt?

No public, nor private, corporation allows the US President to nominate... and the US Congress to appoint it officers. The stockholders of the various federal reserve banks have no say in this process outside the one that is open to any citizen of the US.

Why would you need a say in who's on the board?  The way the act is written it doesn't matter.

[John Edward Mercier]

Because a truly private corporation would not be 'enacted' by Congress, and the shareholders would control the policy through their duly elected agents (Board).

Lots of profit/income should be tax exempt. Largely the Fed was created when midwestern farmers complained about the Eastern Establishment families monetary control through banking. The Federal Income Tax being just a further extension of this hatred.

You can see this even today. The Fed lowers rates cutting the value of 'cash' assets and helping those indebted to the banking institutions. The Income Tax is distributed through many programs to midwestern farmers... Ag subsidies, conservation programs, some Foreign Aid, some welfare programs, and now energy subsidies/protectionary tariffs.

[PattyLee loves dogs]

Largely the Fed was created when midwestern farmers complained about the Eastern Establishment families monetary control through banking.

That may have affected the name given to America's central bank, but the central bank was established by banking interests as in every other case in history, not by farmers. Read that history book I posted the link to... it's free!

[brandon dean]

the fed is bad because it turns exchangeable currency into exchangeable debt.  it's also bad because the end result of a debt-based economy is the debasing of the currency.  it's also bad because an actual free economy would mean anyone could form their own currency out of whatever they want, yet the fed monopolizes the right to create currency. it's also bad because of its fractional policies: they practice a multiplying fractional reserve rate of ten percent, which means they can loan ten times the amount they hold in reserves.  other lending houses can then take a loan from the original lending house and loan out ten times that amount.  if they loan it to another lending house, the original value (of the money created out of thin air, on a whim) depletes another 90 percent when that lending house lends it out.  of course, all of these lenders collect interest plus the full principle.  as Bill Still puts it: "that's why banks always have the tallest buildings in town."