Why is the Federal Reserve bad?

[John Edward Mercier]

The Eastern Establishment families had already centralized most banking... just not under government control. Government control was enacted at the request of Midwestern farmers that complained they were little more than sharecroppers as mortgage debt was seldom repaid in the fluctuating agricultural sector.
Small lightly capitalized competitors existed but disappeared during the bank runs (portrayed in Its a Wonderful Life).
For a bank to function as an economic entity, it must loan deposits... thus having fractional reserves. Once a run on a bank depletes these reserves the bank becomes insolvent. The Federal Reserve Act placed the full credit of the US government behind the banks through FDIC protecting the depositors.
The little guy feeling secure in their deposits, no longer making runs against the banks... and limiting the control of the large banks owned by the EE families. I'm sure Morgan and Chase where quite content with the old decentralized system.

Banking has lost most of its International Finance appeal and is now not much better than a 'low value service' industry. Which is quite noticeable in the P/E ratios.

[PattyLee loves dogs]

For a bank to function as an economic entity, it must loan deposits... thus having fractional reserves.

This was not true of the Bank of Amsterdam, nor of some of the banks under the Scottish period of "free" (i.e. unregulated) banking (some of the Scottish banks did, but only when they were covered by other reserves), nor of many other banks when they began. Banks can loan out time deposits without check-kiting; it is only when they start lending out demand deposits without having other reserves that they become unsound.

(I know reading a history book seems like a big commitment, but at the end of a month you'll have read 500 pages of forum drivel and you still won't know the history of banking, so....    )

[John Edward Mercier]

The Bank of Amsterdam was backed by the full faith of the city... much the same way our FRNs are backed by the full faith of the US government. It also did not operate on a lending principle, but as a money exchange and transfer with profits being from banking 'fees'.
The Scottish banks acted as today's investment banks.

During the period of formation of the Federal Reserve the bank acted as lender. It provided loans directly from its reserves (maintaining a fractional reserve for day-to-day operations).
Today most banks will not 'hold' a mortgage or many other notes... but package them for 'securitization'... thus returning back to their original 'fee' based services.

Since leaving the Gold Standard, the Fed has acted to regulate the various economic factors of US debt incurred through congressional spending. Central banks in countries with little or no debt would not have effect seen by the US.

[Zefferon]

Imagine a socio-economic system in which a very, very small fraction of the
population - less than 1 millionth - became a closed group who demanded and
received tribute from the rest of the population.

This tribute took the form of real wealth and adulation.

The real wealth was taken from just about everyone.

The adulation came from people who where susceptible to being made to believe
in the system.

This closed group started out taking a very small tribute from the populace.
So small that it was barely noticed.

This closed group did not contribute anything to society.

They didn't make tangible goods.
They didn't discover new scientific principles.
They didn't help sick peolple get well.
They didn't make anything in the arts - poetry, music, painting - anything.
They didn't practice any philosophy, such as a religion, that benefitted their fellow
humans.
They didn't teach.
They didn't participate in politics.

Their only form of existence was the extraction of their tribute from the rest of
their fellow human beings.

This closed group where 100% parasitic.

They produced nothing of value and received something of value by 100% fraud.

This closed group consisted completely of absolute parasites.

And they revelled in their parasitism.



WHAT did you say?

You don't like the idea of someone getting something for nothing?

You think that fraud is wrong?

You don't like the idea of one small group forcing a larger group to do
something they didn't believe was good?

You would not live in such a system if you knew it existed?

TOO BAD.

THAT'S THE SYSTEM YOU'RE LIVING IN TODAY.

The Federal Reserve is the third central bank of America.
The first one, the Bank of the United States, was created by act of Congress on
Februay 25th, 1791.
http://landru.i-link-2.net/monques/firstbank.html
It was spearheaded by closed-group member Alexander Hamilton.
http://memory.loc.gov/cgi-bin/ampage?collId=llac&fileName=002/llac002.db&recNum=402

The first Bank of the United States was replaced by the
Second Bank of the United States in 1816.
http://en.wikipedia.org/wiki/History_of_central_banking_in_the_United_States

It was destroyed by president Andrew Jackson.
http://en.wikipedia.org/wiki/Andrew_Jackson
(sublink: "Opposition to the National Bank")

The third central bank of the United States, the Federal Reserve,
was created in 1913.
http://en.wikipedia.org/wiki/Federal_Reserve_Act

It is the mechanism by which the closed group skims the creme-de-le-creme off
the backs of the worked-to-death people of America today, using its collection tool,
the IRS, an institution created at about the same time.
http://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_United_States_Constitution

Some of us members of the Free State Project do not question the existence of
the Federal Reserve or the IRS.

We CONDEMN it.

And we are committed to ABOLISHING it and returning the issuance and control
of money to the U.S. Treasury, where it belongs.

REFERENCES:

http://www.themoneymasters.com/
The best program on dvd for explaining the Federal Reserve and the IRS.

Cracks in the Constitution
http://www.amazon.com/Cracks-Constitution-Ferdinand-Lundberg/dp/0818402792/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1206475922&sr=1-1
A book (or, rather, a TOMB) describing in granite-thick prose why some of the founding fathers never
intended us to have a TRUE republic.
A copy was verified present at the public library in Manchester, NH. They may still have it.

Hologram of Liberty: The Constitution's Shocking Alliance With Big Government
http://www.amazon.com/Hologram-Liberty-Constitutions-Shocking-Government/dp/1888766034/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1206475718&sr=8-1
A book explaining how Alexander Hamilton sabotaged the Constitution from the very beginning.

An income tax isn't neccesary.
http://www.devvy.com/notax.html

Explanation and links for bad money.
http://landru.myhome.net/monques/

Gold isn't the ideal answer.
http://www.gold-eagle.com/editorials_99/parks062899.html

Congressman Ron Paul's Texas Straight Talk
http://www.house.gov/paul/legis_tst.htm
http://www.house.gov/paul/tst/tst2007/tst040907.htm
http://www.house.gov/paul/tst/tst2007/tst101407.htm
http://www.house.gov/paul/tst/tst2007/tst092307.htm

[John Edward Mercier]

The control and issuance of US currency/notes is controlled by Congress/it's agents.
The 'skimming' is done by every form of exchange medium... be it a credit card, FRN, or LD.
Even the direct use of bullion would require certification through an assayer to be useful.

Direct barter avoids the exchange medium (and usage cost), but is not as convenient.

[PattyLee loves dogs]

The 'skimming' is done by every form of exchange medium... be it a credit card, FRN, or LD.

Paying 0.1% for some private company to produce your money is not the same as the Fed being able to take 100% of your money at any second and give it to some dictator (or JP Morgan to buy Bear Stearns).

Read the April 11th New Hampshire Business Review... I have an article about the Fed 

[Luke S]

I really think the Fed helps control inflation .... after the US government gone, we should keep doing what the Federal Reserve says.

I hope that Russell is intentionally playing devil's advocate here, because I absolutely do not agree that the Federal Reserve should exist at all.

The dirty little secret about the Federal Reserve is that it has shareholders, and those shareholders are actually the ones who own the Federal Reserve, and thus technically own the money supply. Now I hate conspiracy theorists, but even conspiracy skeptics will admit that these shareholders exist, and that they own the shares of the Federal Reserve. And not only that, some of them don't even come from America. They come from Spain, and places like that.

And not only that, they actually make interest from the fact that they control the money supply. Now to be fair, the government keeps them on the tightest leash possible so that they cannot do anything like run away with all the money, but it does not change the fact that they are making interest off of the backs of all of us, which is wholly inappropriate given that this is supposed to be our money supply, and that we are a free nation.

I will never stand for this diabolical attack on the sovereignty of America.

This Federal Reserve pig house must be abolished. Americans should own the American money supply, not Spaniards and freeloading pigs! And freeloading pigs should no longer make money off of the backs of all Americans.

[KBCraig]

I really think the Fed helps control inflation .... after the US government gone, we should keep doing what the Federal Reserve says.

I hope that Russell is intentionally playing devil's advocate here

More sarcasm than devil.

You just have to know Russell to "get" him at times.

[toowm]

Notice that due to the bursting of bubbles by easy Fed credit in tech('99), housing('05), and credit('07), the "new" idea is to give the Fed even more power. Harry Browne explained "Why Government Doesn't Work," but politicians truly believe that when it fails, make it bigger.

I agree that boom/bust cycles have been managed by the Fed, but their interventions become larger each cycle, bringing us to eventual collapse. Just the gold standard by itself wouldn't fix things, you would at a minimum also need free banking (including the option of full reserves) and also you would have to allow bad decisions to fail. With this structure (look at peacetime economies from 1830-1910), there definitely are booms and busts, but they are short when not prolonged by political action. And although it was post-Fed, look at the 1921 recession, when the president cut government spending, instead of the current Keynesian "stimulus,"

[mackler]

And not only that, some of them don't even come from America. They come from Spain, and places like that.

Is that what you think?  I suppose one of the conspirators showed you the list of shareholders?
You must be well-connected.

[Luke S]

And not only that, some of them don't even come from America. They come from Spain, and places like that.

Is that what you think?  I suppose one of the conspirators showed you the list of shareholders?
You must be well-connected.

Ok, it turns out I was wrong about the Spaniards. I was reading some documents on the Fed, one of which is this:

By: Edward Flaherty, Ph.D. Department of Economics College of Charleston, S.C. 

Facts: Yes, the Federal Reserve banks are privately owned, but they are controlled by the publically-appointed Board of Governors. The Federal Reserve banks merely execute the monetary policy choices made by the Board. In addition, nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed.

Facts: No foreigners own any part of the Fed. Each Federal Reserve bank is owned exclusively by the participating commercial banks and S&Ls operating within the Federal Reserve bank's district. Individuals and non-bank firms, be they foreign or domestic, are not permitted by law to own any shares of a Federal Reserve bank. Moreover, monetary policy is controlled by the publically-appointed Board of Governors, not by the Federal Reserve banks.

Fact: Independent accounting firms conduct full financial audits of the Federal Reserve banks and the Board of Governors every year. The Fed is also subject to certain types of audits from the Government Accounting Office.

Facts: The Federal Reserve rebates its net earnings to the Treasury every year. Consequently, the interest the Treasury pays to the Fed is returned, so the money borrowed from the Fed has no net interest obligation for the Treasury. The government could print its own currency independent of the Fed, but there would be no effective safeguards against abuse of this power for political gain.

Facts: The Federal Reserve banks have only a small share of the total national debt (about 7%). Therefore, only a small share of the interest on the debt goes to the Fed. Regardless, the Fed rebates that interest to the Treasury every year, so the debt held by the Fed carries no net interest obligation for the government. In addition, it is Congress, not the Federal Reserve, who is responsible for the federal budget and the national debt.

Facts: Kennedy wrote E.O. 11,110 to phase out silver certificate currency, not to issue more of it. Records show Kennedy and the Federal Reserve were almost always in agreement on policy matters. He even signed legislation to give the Fed more authority to issue currency.

Facts: McFadden was incorrect regarding the Fed costing the government money. However, later economic analysis agrees with him that Federal Reserve policy blunders had a substantial role in causing the Depression. However, his implication that this was done deliberately has no basis in fact. Moreover, for a dozen years prior to his rant, McFadden had been the chairman of the House subcommittee that oversaw the Federal Reserve. Why didn't he do anything to reform or abolish the Fed while he had the chance?

Facts: The banking system is indeed able to create money with a mere computer keystroke. However, a bank's ability to create money is tied directly to the amount of reserves customers have deposited there. A bank must pay a competitive interest rate on those deposits to keep them from leaving to other banks. This interest expense alone is a substantial portion of a bank's operating costs and is de facto proof a bank cannot costlessly create money.

Fact: The term 'lawful money' does not refer to gold or silver coin, but to types of money which the government would permit banks to use when tabulating their reserves. These types of money included, but were not limited to, gold and silver coin.

BY: Edward Flaherty, Ph.D. Department of Economics College of Charleston, S.C.

And where it said "No foreigners own any part of the fed", for whatever reason, my eye saw "foreigners own part of the fed".

But I was NOT wrong about the interest. And in fact, this guy, who seems to defend the Fed, even says "nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed". First of all, if he said nearly all is rebated, then that means that the government does pay some net interest to the Fed. Which means that the taxpayers pay it.

Of course banks should be able to get interest when they loan people money, and the loan is consensual.

But there should be absolutely no great big bank that gets free money, of any amount, off of the backs of evreybody else simply because it owns the money supply. And that is exactly what is happening, and it needs to stop.

[John Edward Mercier]

The 'skimming' is done by every form of exchange medium... be it a credit card, FRN, or LD.

Paying 0.1% for some private company to produce your money is not the same as the Fed being able to take 100% of your money at any second and give it to some dictator (or JP Morgan to buy Bear Stearns).

Read the April 11th New Hampshire Business Review... I have an article about the Fed 

The Fed took none of my money... no anyone elses. They guaranteed a loan... the end results yet unknown.
Not much different than Visa choosing to back the loan. Except its not their exchange medium at risk.

And not only that, some of them don't even come from America. They come from Spain, and places like that.

Is that what you think?  I suppose one of the conspirators showed you the list of shareholders?
You must be well-connected.

Ok, it turns out I was wrong about the Spaniards. I was reading some documents on the Fed, one of which is this:

By: Edward Flaherty, Ph.D. Department of Economics College of Charleston, S.C. 

Facts: Yes, the Federal Reserve banks are privately owned, but they are controlled by the publically-appointed Board of Governors. The Federal Reserve banks merely execute the monetary policy choices made by the Board. In addition, nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed.

Facts: No foreigners own any part of the Fed. Each Federal Reserve bank is owned exclusively by the participating commercial banks and S&Ls operating within the Federal Reserve bank's district. Individuals and non-bank firms, be they foreign or domestic, are not permitted by law to own any shares of a Federal Reserve bank. Moreover, monetary policy is controlled by the publically-appointed Board of Governors, not by the Federal Reserve banks.

Fact: Independent accounting firms conduct full financial audits of the Federal Reserve banks and the Board of Governors every year. The Fed is also subject to certain types of audits from the Government Accounting Office.

Facts: The Federal Reserve rebates its net earnings to the Treasury every year. Consequently, the interest the Treasury pays to the Fed is returned, so the money borrowed from the Fed has no net interest obligation for the Treasury. The government could print its own currency independent of the Fed, but there would be no effective safeguards against abuse of this power for political gain.

Facts: The Federal Reserve banks have only a small share of the total national debt (about 7%). Therefore, only a small share of the interest on the debt goes to the Fed. Regardless, the Fed rebates that interest to the Treasury every year, so the debt held by the Fed carries no net interest obligation for the government. In addition, it is Congress, not the Federal Reserve, who is responsible for the federal budget and the national debt.

Facts: Kennedy wrote E.O. 11,110 to phase out silver certificate currency, not to issue more of it. Records show Kennedy and the Federal Reserve were almost always in agreement on policy matters. He even signed legislation to give the Fed more authority to issue currency.

Facts: McFadden was incorrect regarding the Fed costing the government money. However, later economic analysis agrees with him that Federal Reserve policy blunders had a substantial role in causing the Depression. However, his implication that this was done deliberately has no basis in fact. Moreover, for a dozen years prior to his rant, McFadden had been the chairman of the House subcommittee that oversaw the Federal Reserve. Why didn't he do anything to reform or abolish the Fed while he had the chance?

Facts: The banking system is indeed able to create money with a mere computer keystroke. However, a bank's ability to create money is tied directly to the amount of reserves customers have deposited there. A bank must pay a competitive interest rate on those deposits to keep them from leaving to other banks. This interest expense alone is a substantial portion of a bank's operating costs and is de facto proof a bank cannot costlessly create money.

Fact: The term 'lawful money' does not refer to gold or silver coin, but to types of money which the government would permit banks to use when tabulating their reserves. These types of money included, but were not limited to, gold and silver coin.

BY: Edward Flaherty, Ph.D. Department of Economics College of Charleston, S.C.

And where it said "No foreigners own any part of the fed", for whatever reason, my eye saw "foreigners own part of the fed".

But I was NOT wrong about the interest. And in fact, this guy, who seems to defend the Fed, even says "nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed". First of all, if he said nearly all is rebated, then that means that the government does pay some net interest to the Fed. Which means that the taxpayers pay it.

Of course banks should be able to get interest when they loan people money, and the loan is consensual.

But there should be absolutely no great big bank that gets free money, of any amount, off of the backs of evreybody else simply because it owns the money supply. And that is exactly what is happening, and it needs to stop.

You've misread again... all interest paid to the Fed from the member banks is returned to the US Treasury.
The Fed acting as agent for Congress loans money to its member banks... it is consensual and involves interest.

The money supply is just an exchange medium. All exchange mediums get 'money off the backs of everybody' that uses them... credit cards wouldn't be a very profitable business if they didn't.

I know everyone is unhappy with the current leadership, or lack there of, in the Fed BOG... even Paul Volker is flipping out. But the fact is you can't stabilize, or return to strength, a currency with the present fiscal policy that we have. With this level of debt obligation, the monetary policy is now just along for the ride.

[PattyLee loves dogs]

The Fed took none of my money... no anyone elses. They guaranteed a loan...

They printed the money for the loan, and guaranteed the loan. That's not worth anything? Fine, give me 30 billion and a guarantee then, since it won't cost you anything 

...there's also the little matter of their "monetizing" foreign kleptocrats' debt when it comes due, starting with the Sudan in 1980 (that was one of the first things Ron Paul did that ticked off the RINO leadership, he publicized the Sudan bailout). And the 200 billion in Treasuries that they recently "loaned" banks in exchange for worthless subprime mortgage securities. Not to mention that the recent wars have all been financed by inflation instead of taxes, which can only be done because there is a Fed.

The Fed is a financial black hole with no controls on what it buys or who it subsidizes. Fed delenda est.

[John Edward Mercier]

They never printed any money for the loan... because they never made a loan... only a loan guarantee.
When you co-sign for a loan... you do not actually loan money. The reason the outcome is unknown. Will the loan go into default? Unknown. Will the assets be worth more than the $30 billion? If so the loan guarantee includes contractual language for the Fed to make the profit.

The exchanging subprime mortgages for treasuries, was a matter of injecting confidence into the market. So the banks would continue to loan. If the banks go bust, dollar goes bust. Makes no difference whether your holding  a subprime mortgage or treasury.

[PattyLee loves dogs]

The exchanging subprime mortgages for treasuries, was a matter of injecting confidence into the market.

It's a matter of exchanging real treasuries for worthless tranches of loans to deadbeats.

John, there's no law of the universe that says that we have to use an unstable fractional-reserve system for money... do we let grain elevators loan out more wheat than they really have? Maybe we will soon:

http://www.lewrockwell.com/walker/walker31.html


The solution is to separate Money and State; the same people shouldn't have both the nuclear weapons and the printing presses.

Here's a good article in the latest New Hampshire Business Review which should clear it all up for you:

http://www.nhbr.com/apps/pbcs.dll/article?AID=/20080411/NEWS01/559877501