bobbyw24
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Following is an interesting feedback/article on the US Federval Reserve that Commodity Online received today from Austin Simko, Director of Public Policy, Slow Growth Initiative, a Massachusetts-based nonprofit organanization.
Dear Commodity Online Editor,
I work for the Slow Growth Initiative, a Massachusetts-based nonprofit committed to advocating for a sustainable model of economic growth. One of the projects we have been focusing on is the configuration, policies, and effects of the Federal Reserve System.
I am reaching out to members of the media who have written stories on the Federal Reserve and sharing some of the research we have assembled. Our goal is simple: to share our findings with members of the press charged with covering the Fed, both to correct popular misconceptions and to help connect the dots on the true impact of the Fed.
Your article, “Gold price suppression is public policy in America”, was wonderful. Please accept the following as a resource as you continue to cover the Fed.
To manipulate the nation’s money supply, the Fed purchases and sells U.S. securities to banks. When it wishes to expand the money supply, the Fed buys securities held by member banks, providing them with the dollar value of those securities. The result of this monetary tool is that, at any given time, the Fed holds and owns a certain amount of U.S. debt.
Consequently, the Fed receives interest payments from the Treasury on that debt. The troubling element of this arrangement is that the money used by the Fed to purchase the U.S. debt is created out of thin air. This means that the U.S. Treasury - funded, of course, by U.S. taxpayers - is making interest payments to an entity that purchased debt through the arbitrary, risk-free, and electronic creation of money.
This arrangement is incredibly costly to U.S. taxpayers.
Firstly, the U.S. Treasury has paid approximately 30 billions in debt interest to the Fed in each of the last three years. But this is only the beginning. To fully understand the cost of the Fed to U.S. taxpayers, one must consider the concept of opportunity cost: What does it cost us to have the Fed create the funds to purchase debt from the Treasury, instead of a central bank creating the funds?
In our modern central banking system, the Fed expands the money supply by expanding the bank accounts of member banks by the click of a mouse. This power is arbitrary and can therefore be exercised by any entity, including the Federal government. If the Federal Government, rather than the Fed, were to exercise the authority to create money, the fiscal and monetary policy-making of this country would be provided a higher level of coherence.
Most importantly, if the Federal government used its latent power to create money, a byproduct of increasing the monetary supply by a certain amount of dollars would be a lowering of the national debt by the same amount of dollars. (The reasoning is simple: The government could expand the money supply by purchasing and then retiring securities. This is different than the current practice which allows the Fed to buy and preserve securities/U.S. debt.)
Had this alternative been the status quo system, the approximately 600 billion dollars of the U.S. debt currently held by the Fed would remain in the money supply but not count towards the nation’s debt. Moreover, if a central bank had pumped trillions of dollars into the banking system over the past year instead of the Fed, the result would be identical except for the salient fact that the nation’s debt would be trillions of dollars lower than it is today.
And finally, if the United States has a central bank capable of expanding the money supply through government spending, and not through the purchasing of bank-held U.S. Securities, a host of other positive benefits could be produced. The United States is suffering from a series of under-funded initiatives, neglected deficiencies, and cash-strapped municipalities.
The billions of dollars saved through not needing to make interest payments would begin to alleviate these afflictions. And the trillions of dollars created by a true central bank in the long-term would transform the nation and place it on a previously unimaginable path of prosperity. Investments in education, infrastructure, and alternative energies could all be funded through a retooled monetary policy-making apparatus. Aside from this glaring fiscal opportunity cost, the Fed approaches the nation’s monetary policy with a profit-centered, private perspective.
As an example, in 2008 the CEO of JP Morgan served as a board member of the Federal Reserve branch of New York as he negotiated on behalf of JP Morgan for a $29 billion bridge loan to allow his company to acquire Bear Sterns. Another example of private-interest primacy within the Fed is the Directo a Mexico program. Under this new program, illegal Mexican immigrants in the United States are permitted to send remittances back to Mexico via the Federal Reserve’s automated clearinghouse.
The Fed permits illegal residents to use the banking system by requiring that they produce only a Matricula Consular, an illegitimate form of identification due to rampant counterfeiting and extremely low issuance standards. This clumsy program flouts and undermines the immigration laws of this country. It also provides a valuable money-transferring tool to drug and human traffickers within this country, making law enforcement all but impossible.
This program reveals the Fed’s sympathy for profit-making and its accompanying disregard for the public good. Under the current system, expansions to the money supply provide banks with increased capital to loan out and profit from. By making expansionary monetary policy profitable for private banks, this system incentivizes unwise expansions of the money supply.
The result is needless inflation and increased national debt. Ultimately, the transformation of the Federal Reserve and incorporation of it into the Executive Branch is a prudent, measured, practical, and essential step in putting this nation on the path to sustainable prosperity.
Congressman Wright Patman, Chairman of the House Committee on Banking and Currency served in his capacity for 16 years. He is an unimpeachable expert. “I have never yet had anyone who could, through the use of logic and reason, justify the Federal Government borrowing the use of its own money…I believe the time will come when people will demand that this be changed.
I believe the time will come in this country when they will actually blame you and me and everyone else connected with the Congress for sitting idly by and permitting such an idiotic system to continue.
http://www.commodityonline.com/news/US-Treasury-pays-30-billion-debt-interest-to-the-Fed-23905-3-1.html
Dear Commodity Online Editor,
I work for the Slow Growth Initiative, a Massachusetts-based nonprofit committed to advocating for a sustainable model of economic growth. One of the projects we have been focusing on is the configuration, policies, and effects of the Federal Reserve System.
I am reaching out to members of the media who have written stories on the Federal Reserve and sharing some of the research we have assembled. Our goal is simple: to share our findings with members of the press charged with covering the Fed, both to correct popular misconceptions and to help connect the dots on the true impact of the Fed.
Your article, “Gold price suppression is public policy in America”, was wonderful. Please accept the following as a resource as you continue to cover the Fed.
To manipulate the nation’s money supply, the Fed purchases and sells U.S. securities to banks. When it wishes to expand the money supply, the Fed buys securities held by member banks, providing them with the dollar value of those securities. The result of this monetary tool is that, at any given time, the Fed holds and owns a certain amount of U.S. debt.
Consequently, the Fed receives interest payments from the Treasury on that debt. The troubling element of this arrangement is that the money used by the Fed to purchase the U.S. debt is created out of thin air. This means that the U.S. Treasury - funded, of course, by U.S. taxpayers - is making interest payments to an entity that purchased debt through the arbitrary, risk-free, and electronic creation of money.
This arrangement is incredibly costly to U.S. taxpayers.
Firstly, the U.S. Treasury has paid approximately 30 billions in debt interest to the Fed in each of the last three years. But this is only the beginning. To fully understand the cost of the Fed to U.S. taxpayers, one must consider the concept of opportunity cost: What does it cost us to have the Fed create the funds to purchase debt from the Treasury, instead of a central bank creating the funds?
In our modern central banking system, the Fed expands the money supply by expanding the bank accounts of member banks by the click of a mouse. This power is arbitrary and can therefore be exercised by any entity, including the Federal government. If the Federal Government, rather than the Fed, were to exercise the authority to create money, the fiscal and monetary policy-making of this country would be provided a higher level of coherence.
Most importantly, if the Federal government used its latent power to create money, a byproduct of increasing the monetary supply by a certain amount of dollars would be a lowering of the national debt by the same amount of dollars. (The reasoning is simple: The government could expand the money supply by purchasing and then retiring securities. This is different than the current practice which allows the Fed to buy and preserve securities/U.S. debt.)
Had this alternative been the status quo system, the approximately 600 billion dollars of the U.S. debt currently held by the Fed would remain in the money supply but not count towards the nation’s debt. Moreover, if a central bank had pumped trillions of dollars into the banking system over the past year instead of the Fed, the result would be identical except for the salient fact that the nation’s debt would be trillions of dollars lower than it is today.
And finally, if the United States has a central bank capable of expanding the money supply through government spending, and not through the purchasing of bank-held U.S. Securities, a host of other positive benefits could be produced. The United States is suffering from a series of under-funded initiatives, neglected deficiencies, and cash-strapped municipalities.
The billions of dollars saved through not needing to make interest payments would begin to alleviate these afflictions. And the trillions of dollars created by a true central bank in the long-term would transform the nation and place it on a previously unimaginable path of prosperity. Investments in education, infrastructure, and alternative energies could all be funded through a retooled monetary policy-making apparatus. Aside from this glaring fiscal opportunity cost, the Fed approaches the nation’s monetary policy with a profit-centered, private perspective.
As an example, in 2008 the CEO of JP Morgan served as a board member of the Federal Reserve branch of New York as he negotiated on behalf of JP Morgan for a $29 billion bridge loan to allow his company to acquire Bear Sterns. Another example of private-interest primacy within the Fed is the Directo a Mexico program. Under this new program, illegal Mexican immigrants in the United States are permitted to send remittances back to Mexico via the Federal Reserve’s automated clearinghouse.
The Fed permits illegal residents to use the banking system by requiring that they produce only a Matricula Consular, an illegitimate form of identification due to rampant counterfeiting and extremely low issuance standards. This clumsy program flouts and undermines the immigration laws of this country. It also provides a valuable money-transferring tool to drug and human traffickers within this country, making law enforcement all but impossible.
This program reveals the Fed’s sympathy for profit-making and its accompanying disregard for the public good. Under the current system, expansions to the money supply provide banks with increased capital to loan out and profit from. By making expansionary monetary policy profitable for private banks, this system incentivizes unwise expansions of the money supply.
The result is needless inflation and increased national debt. Ultimately, the transformation of the Federal Reserve and incorporation of it into the Executive Branch is a prudent, measured, practical, and essential step in putting this nation on the path to sustainable prosperity.
Congressman Wright Patman, Chairman of the House Committee on Banking and Currency served in his capacity for 16 years. He is an unimpeachable expert. “I have never yet had anyone who could, through the use of logic and reason, justify the Federal Government borrowing the use of its own money…I believe the time will come when people will demand that this be changed.
I believe the time will come in this country when they will actually blame you and me and everyone else connected with the Congress for sitting idly by and permitting such an idiotic system to continue.
http://www.commodityonline.com/news/US-Treasury-pays-30-billion-debt-interest-to-the-Fed-23905-3-1.html
