Federal Reserve

The Federal Reserve is Not Your Friend

Fed policies disproportionately favor wealth.

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Imagine that the Food and Drug Administration (FDA) was a corporation, with its shares owned by the nation's major pharmaceutical companies. How would you feel about the regulation of medications?  Whose interests would this corporation be serving? Or suppose that major oil companies appointed a small committee to periodically announce the price of a barrel of crude in the United States. How would that impact you at the gasoline pump?

Such hypotheticals would strike the majority of Americans as completely absurd, but it's exactly how our banking system operates.

The Federal Reserve is literally owned by the nation's commercial banks, with a rotation of the regional Reserve Bank presidents constituting 5 of the 12 voting members of the Federal Open Market Committee (FOMC), the body that sets targets for certain interest rates. The other 7 members of the FOMC are the D.C.-based Board of Governors—which includes the Fed chairperson, currently Janet Yellen—and are nominated by the President. The Fed serves its owners and patrons—the big banks and the federal government, while the rest of Americans get left behind.

The Federal Reserve has the ability to create legal tender through mere bookkeeping operations. By the simple act of buying, for example, $10 million worth of bonds, the Federal Reserve literally creates $10 million worth of money and adds it into the system. The seller's account goes up by $10 million once the Fed's monies are received.  Nobody's account gets debited for $10 million. This is a tremendous amount of power for an institution to possess, and yet the Fed shrouds itself in secrecy and is accountable to no one.

In December 2008, Congress summoned then-Fed Chairman Ben Bernanke to provide information concerning the enormous "emergency liquidity" programs that had begun during the financial crisis earlier that fall—all the new acronyms Wall Street analysts would come to know, such as TAF (Term Auction Facility), PDCF (Primary Dealer Credit Facility), and TSLF (Term Securities Lending Facility). Bernanke did not need Congress' permission to conduct those programs, but even worse, he refused to disclose the recipients of the $1.2 trillion in short-term loans that we now know were being administered behind closed doors.  This staggering secret loan payouts doesn't even include hundreds of billions in "swaps" to foreign central banks. Bernanke's rationale was that if the Fed announced the names of the big banks being rescued, then depositors and investors would flee, thus defeating the whole purpose of the rescue operations.

Americans then and now were lectured that the trillions in loans and asset purchases were all for their own good and eventual benefit, to resuscitate the credit markets and bolster home values. Yet the truth remains—it is Wall Street that benefits from the Fed at the expense of Main Street.  To make things worse, in October 2008—one month after Lehman Brothers collapsed and precipitated the worst of the financial crisis—the Fed began exercising a new policy of paying interest on reserves. The Fed began to subsidize and directly pay the nation's bankers not to make loans to their customers and keep their reserves parked on deposit with the Fed.

Today, Fed officials can give all sorts of technical explanations for that policy—a move that remains in effect today.  Yet your average depositor received no such direct subsidy and likely still receives almost no interest on short term deposits.

It's unfortunately in keeping with Fed policies that disproportionately favor wealth—like low interest rates, a policy benefiting those that have the most assets and first access to borrowing, not for people who have little or no capital.

No matter how much the Fed protests to the contrary, it shows little regard for the average Joe or Jane. Consider the types of assets it bought as the Fed's balance sheet exploded from $905 billion in the beginning of September 2008 to $2.2 trillion by the end of the year. (The Fed currently holds some $4.5 trillion in total assets, after the various rounds of "quantitative easing.")

Rather than bailing out struggling homeowners who were underwater, with higher mortgage debt than their homes were worth, the Fed instead loaded up on U.S. Treasuries (its own IOUs) and mortgage-backed securities—the very same "toxic assets" that reflected the horrible judgment of many investment bankers and the ratings agencies that signed off on the shenanigans.  It is no coincidence that the federal government was able to run trillion-dollar-plus deficits for four consecutive years with no concern from the financial markets; everyone knows the Fed stands in the wings, willing to "print" new legal tender and sop up Uncle Sam's IOUs (which eventually come due, as we are now seeing in Greece).

When it comes to money, politicians are often seen as the least trustworthy. But in the debate over income and wealth inequality, few people point the finger at the biggest benefactor of the wheeler dealer crony capitalists: the Federal Reserve. The nation's central bank, which regulates all other banks and has the power to create money simply by buying assets, should be under the utmost scrutiny. Yet, perversely, members of Congress have to fight an uphill battle just to audit the Fed. We do not want to politicize monetary policy (as our detractors allege), but rather simply shine a very bright light on this unaccountable and unchecked (and thus entirely un-American) power. By doing this, we may finally be able to rein it in.

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54 responses to “The Federal Reserve is Not Your Friend

  1. Ignore that man behind the curtain!.

    1. Is he holding a footlong?

  2. Hah…do you have a economics degree?! Obviously you should leave this stuff to the experts. We are doing gods work and have the best interest of the masses at heart. Just trust us.

    1. My tin foil hat radar is beaming so you are wrong!

    2. For the record, yes I do have an Econ degree 😛

      You seem to be confusing the words ‘God’ and ‘gold’. Not entirely surprising, they look a lot alike, and both tend to hold a place in people’s hearts.

  3. Remember when the nut cases said that the financial bailout would extend the recovery process or make it difficult to have a real recovery? Well obviously they have been proven wrong! I read it in the New York Times and the Wall Street Journal….even those two diametrically opposed papers agree. The economy has recovered brilliantly and the stock market has been making new highs for years, the CPI is low, oil prices have cratered and gold prices have fallen 50% from the highs. The only people who don’t see how great the economy is are tin foil hat wearers who think our government would actually kill it’s own people in order to start a war!…keep it it up hicktards we are laughing at you!

    1. Isn’t over yet. How much more debt can we afford before the people learn to live within their means?! The economy has not recovered good jobs and the minimum wage has been suppressed. I wonder how much the fed has to do with that. Good jobs are what we need and not government handouts. If people had a chance to get better pay, the minimum wage jobs would have to pay more or lose employees. The stock market is for gamblers who have extra money they can afford to lose. None of us can afford to lose!

      1. “In the long run we are all dead”…Keynes was a genius and you are a moron. The Fed is good and anyone with a Nobel Prize will tell you so….Do you have a Nobel Prize? no because you are fucking stupid….take your QE and enjoy it …it is good for you….just like flouride is good for your health and the good leaders of this country have to convince all the idiots to drink it for their own good.

        You should be thanking the Fed for the great economy we enjoy. Look at this country without the Fed….there was not even ELECTRICITY and toilets in most houses! Do you want electricity and toilets? There also was slavery when we had no Fed….are you aracist who wants slaves?I would assume not…just let the Nobel prize winners decide…pretty sure they are smarter than you about these things.

        1. I’m not sure people who make dynamite should be guessing about which economists are smartest.

        2. Love your sarcasm, and you’re off on the timing of the Fed vs. electricity, and toilets.

  4. “Today, Fed officials can give all sorts of technical explanations for that policy?a move that remains in effect today.”

    I think the main reason was to avoid hyperinflation. Otherwise, the inflation hawks end up being right.

    1. Very astute Brian…we need to bail out the biggest banks from unfortunate decisions that NOBODY could predict….but in order to protect the masses from these bailouts we need to keep making additional payments to the banks…it is for the good of all. if it weren’t for the better goodness of all then why would our genius economic leaders make such good decisions? therefore it must be the best decision.

      You are very well schooled in this I can tell. Perhaps you would like a job explaining economics to the retarded public who can’t understand the simple facts that educated people already comprehend.

      1. That’s impossible. The retarded public is still vaguely unsure why the rich keep getting richer, but the poor stay poor, but they think it has something to do with too much freedom.

        1. well then our education system is working perfectly…gun nuts and too much freedom of speech are some of our biggest problems. I read that in the New Yorker.

          1. …Funny, I read it in Pravda.

            Consensus?

          2. HERE, let it be said, is the solution to EVERYTHING:
            Scienfoology Song? GAWD = Government Almighty’s Wrath Delivers

            Government loves me, This I know,
            For the Government tells me so,
            Little ones to GAWD belong,
            We are weak, but GAWD is strong!
            Yes, Guv-Mint loves me!
            Yes, Guv-Mint loves me!
            Yes, Guv-Mint loves me!
            My Nannies tell me so!

            GAWD does love me, yes indeed,
            Keeps me safe, and gives me feed,
            Shelters me from bad drugs and weed,
            And gives me all that I might need!
            Yes, Guv-Mint loves me!
            Yes, Guv-Mint loves me!
            Yes, Guv-Mint loves me!
            My Nannies tell me so!

            DEA, CIA, KGB,
            Our protectors, they will be,
            FBI, TSA, and FDA,
            With us, astride us, in every way!
            Yes, Guv-Mint loves me!
            Yes, Guv-Mint loves me!
            Yes, Guv-Mint loves me!
            My Nannies tell me so!

      2. NEEDS MOAR TEATHUGLICAN INSULTS!

  5. “Rather than bailing out struggling homeowners who were underwater, with higher mortgage debt than their homes were worth, the Fed instead loaded up on U.S. Treasuries (its own IOUs) and mortgage-backed securities?the very same “toxic assets” that reflected the horrible judgment of many investment bankers and the ratings agencies that signed off on the shenanigans.”

    False dichotomy, the Fed should have done neither of these things. Rand Paul, I thought you knew better.

    1. pretty sure Rand was just assuming for the the case of argument that a bailout was neccessary(even though he might not agree)….then what type of bailout would make most sense?A or B.

      From his perspective(the tin foil brigade) he could be thinking it is too controversial to argue all together that bailouts shouldn’t happen….but perhaps it isn’t politically impossible to concede the bailout argument and the co on to examine why a more politically equitable bailout wasn’t chosen….when you examine that question it becomes obvious(to the conspiracy nutz) that the bailouts were a nefarious means to transfer wealth from the middle class to the the elite bankster classes.

      of course the average democrat and red teamer is knot good logic…so the whole point is lost on those aholes and they p[retty much will get what they deserve good and hard.

      1. Perhaps, but if Rand is only interested in making arguments that are politically possible, then we are screwed.

        1. there is very little doubt about either of these things

      2. “when you examine that question it becomes obvious(to the conspiracy nutz) that the bailouts were a nefarious means to transfer wealth from the middle class to the the elite bankster classes.”

        I’m just wondering what else you could call it.

        1. From the illustrious author of “the Great Crash of 2008” (co-authored with Ross Garnaut)….a book that came with high praise from the World Bank– “A masterly analysis.” ?Justin Lin.

          “In the end, despite the questions over QE, I suspect history will smile on Ben Bernanke as the man that saved Western civilisation from total financial collapse. The ultimate rationale for a central bank is to be the lender of last resort and on this score Bernanke was fast enough, very innovative and sufficiently bold to rescue the world from a depression that would have made the 1930s look like a doddle.”

          I suppose you idiots know more than a World Bank expert?….next you’ll tell me you know more about climate science than all the scientist at leading climate change institutes!

        2. Mortimer Zuckerman from the Wall Street Journal had this praise:

          http://www.wsj.com/articles/SB…..3228970760

          Robert Samuelson at the Washington Post was thankful as well:

          http://www.washingtonpost.com/…..01829.html

          obviously all serious people that are educated and important on the left AND the right agree….The Fed Saved the World!

          1. Can’t tell if it’s real, a troll, or just overly sarcastic…

            1. The sarcasm is brilliantly overplayed.

  6. Dear Mark Spitznagel: Please become David Koch 2.0, but with more goats and less falling out with your fellow Austrians.

    While I’m lukewarm on Rand (especially this tepid, uninspired campaign he’s run), that he occasionally brings serious Austrians on board in addition to referencing Bastiat once in a blue moon gives me hope that he has convictions beyond dancing the political polka with the fat bastard from NJ.

  7. The Federal Reserve Is Not Your Friend

    Oh! You don’t say? In other news: water is wet.

    1. In OTHER, other news, the rich get richer, and the poor have children! Especially when the Vatican announces the condoms are EVIL, because “every sperm is sacred”!

  8. Look on the bright side, the fed will end up unintentionally creating jobs. Now let’s get back to ass sex, Mexicans, and pot.

  9. A criminal fraud organization is not my friend? Gee, who could have guessed?

    -jcr

  10. Rand who?

    Also, you know who else controlled a central bank?

  11. Oh, my, I must quibble.
    One: The authors’ example of $10 million becoming $10 million does not even apply the leverage from fractional reserve requirements, nor discuss how low those requirements are now. Why omit that key point?
    Two: In a sense the Fed’s purchase of mortgage-backed securities DID bail out the “average Joe” – if Joe is the guy who never paid a back his principal and then walked away. The FRB bought or took on (from the failed investment banks) many securities backed by all those crap mortgages.
    Three: No, U.S. Treasuries are not the Fed’s “own IOUs.” Later in the very same paragraph the authors say more correctly they are “Uncle Sam’s” (i.e. the U.S. Treasury’s) “IOUs.”
    Quibbles now voiced, I say Go Rand. Good Luck.

    1. Well said. The IOUs do not belong to the Fed. The federal government must, in theory, buy back those bonds with future dollars.

  12. 1932-1964 quarter = $2.82 per quarter based upon the silver content.

    2.82 x 4 = $11.28 of purchasing power for every dollar.

    An individual earning a salary of $45,000 would have a purchasing power equal to : 45,000 x 11.28 = $ 507,600!!!

    Look at how much the FED has robbed purchasing power from individuals through currency debauchery. This is nothing new, as it’s been done throughout history with debased coinage and worthless paper, which are only the ghost of money.

  13. What else is new? By the way, have you ever come upon the old saw, that.. runs as follows. Money Talks, BS Walks.

  14. Valid criticisms of the article aside, making this a major issue has two challenges. First, how do you make this theft understandable and believable to the average Joe? After all it involves math and stuff and the thieves have the word “Federal” in their title. Secondly, what do you want to do about it that doesn’t risk anarchy once Joe and his buddies figure this shit out?

    1. Say you’re a fish monger in Greece. And your father and your father’s father were also fish mongers. Every day, for the entire lives of 3 generations, you and your people went straight to the ships pulling in and picked up your load of fish to mong for the day. All of a sudden “Greece” happens to you. This is very bewildering to the fish monger since the same fish continue to swim in the sea right in front of him while the rest of his world has gone to hell in a hand-basket. It would be quite apparent to him that no decisions he made has brought the world crashing down because the fish are still there, and they produced themselves. The fish monger would have no trouble at all figuring out that decisions being made by somebody else, somewhere else, brought the whole thing down. Message to average Joe – BE THE FISH MONGER

  15. For some reason I have this going through my head-

    Hello world, here’s a song that we’re singin’
    Come on, get happy
    A whole lotta lovin’ is what we’ll be bringin’
    We’ll make you happy

    We had a dream we’d go travelin’ together
    And spread a little lovin’ if we’ll keep movin’ on
    Somethin’ always happens whenever we’re together
    We get a happy feelin’ when we’re singin’ a song

    Travelin’ along, there’s a song that we’re singin’
    Come on, get happy
    A whole lotta lovin’ is what we’ll be bringin’
    We’ll make you happy
    We’ll make you happy
    We’ll make you happy

    And it looks like Mrs. Partridge is a day or two behind on her dialysis.

  16. “In your dream, the Federal Reserve is not a scam”
    “In your dream, Social Security is not a scam”
    “In your dream welfare is not a scam”
    “In your dream, Obama is not a scam”
    “In your dream, all the rest were not a scam”
    “In your dream, the constitution was not a scam”…….”

    Original music and lyrics: “Dreams[ Anarchist Blues]”: http://www.youtube.com/watch?v=w0o-C1_LZzk

    So, dear reader, dream on, or not? As always, your choice.

    See my Fed article:”Ben Bernanke: The Great[est] Inflator ? ” :
    http://onebornfreesfinancialsa…..lator.html

    Regards, onebornfree.
    Personal freedom therapist
    onebornfreeatyahoodotcom

  17. The Federal Reserve is the United States’ central bank. It is run by seven governors appointed by the president and confirmed by congress. It has indeed failed totally in the past eight years to implement policies that would end our economic malaise. Instead it has repeatedly implemented those policies that were applicable to the UK and described in the UK-oriented textbooks of fifty years ago.

    If this failure of its policies concerns you, you would be well advised not to grouse and moan and suggest meaningless “audits” and how its establishment was financed one hundred years ago but, rather, policies that would work for today’s realities such that they would flow more revenues into our employers such that they will hire more workers and produce more goods and services (and profits, tax collections, and wages).

    Such policies exist and would quickly move us to significantly more profits, jobs and tax collections. I respectfully suggest that the authors and readers of this article go to Amazon and download something such as “Inflation, Unemployment, and Government Deficits: End Them” or something similar from a trained economist with real world experience in business and commercial banking.

    If you are going to suggest solutions, you need to suggest those that are significant and will work.

    1. “It has indeed failed totally in the past eight years” since it’s inception.

      “Such policies exist and would quickly move us to significantly more profits, jobs and tax collections., and those policies are called freedom and liberty.

      Why would anyone want the gov’t to collect more taxes let alone extort individuals to begin with? Let alone let a central bank control money, to which it has destroyed the dollar and propped up a gov’t that is 18 trillion in debt.

      1. Your reply makes no sense – the central bank does not control “freedom and liberty” and it in no way suggests that more taxes should be collected or individuals extorted. The central bank, you do note correctly, “props up the government” although the 18 trillion in debt you mention neither exists at anything close to that magnitude or is unpayable. Your really might profit by informing yourself to our economic realities – try Lindauer’s book. It is quite readable.

        1. Martin, It makes plenty of sense. The only policies should be freedom and liberty, of which gov’t and a central bank are antithetical to.

          The central bank is aided by the gov’t which 1) confiscated the people’s gold through threats of violence, debased coinage and 2) forces an exchange partner to accept a media of exchange (the dollar) against ones will.

          The 18 trillion plus unfunded liabilities is indeed real. No company that mismatches assets and liabilities like the FED does would ever survive in a free market. The company wouldn’t even be able to garner investor capital with such a fraudulent business plan.

          To see the theft that has taken place, just look at the simple aforementioned calculations. Those are economic realities.

    2. So you want more tax collections?

      BTW, you cannot fix a scam. The Federal Reserve is a scam, always was, always will be- so take it from there. 🙂

      See: “Inflation,The Federal Reserve and The Consumer Price Index”

      http://onebornfreesfinancialsa…..e-and.html

      Regards, onebornfree
      Personal freedom therapist
      onebornfreeatyahoodotcom

  18. Start working at home with Google! It’s by-far the best job I’ve had. Last Wednesday I got a brand new BMW since getting a check for $6474 this – 4 weeks past. I began this 8-months ago and immediately was bringing home at least $77 per hour. I work through this link, go? to tech tab for work detail,,,,,,,

    http://www.homejobs90.com

  19. Is it possible that Rand Paul doesn’t understand that giving ANY bank a charter gives them the unbelievable right to “lend” money into existence with a bookkeeping entry?

    Yes, your friendly bank manager does not take your deposit to eek out a meager living on the spread between deposit and loan interest!

    That $500K mortgage loan was deposited through a simple computer entry, and the bank gets to keep every dollar of interest (they get their interest up front)… on money they create from nothing.

    Yes Virginia, there is a magic money tree after all… it’s there on every street corner in the western world (owned outright by the banking cabal), in your friendly local bank.

    Note: Just to clear up the most confusing aspect of this legalized theft, beyond the comprehension of most anyone, the “principal” (you know the part that gets paid back last) does get removed from the bank balance sheet as it is paid, but the bankers get to keep the interest on the magic money tree cash used to make the loan. And of course by that time the “funny money” has been busy working its way through the economy diluting asset value and creating inflation (required to keep the Ponzi scheme afloat, but deadly to the average pleb).

    Pretty good work if you can get it… of course anyone other than a banking entity would get 5 to 10 yrs for doing the same thing.

    Lucy (Jamie, Lloyd, Ben, et al)… you got some ‘splainin’ to do!

  20. Three pillars of sand our economic system is built on:
    1.Federal Reserve Bank
    2.Fiat Currency
    3.Fractional Reserve Banking

    The Federal Reserve tries to regulate the economy. Their two mandates are current and expected inflation and unemployment.

    The Federal Reserve creates money and or makes money inexpensive by manipulating interest rates lower. Rarely manipulating rates higher. This is inflation. Prices go up and real wages go down.

    The Federal Reserve creates bubbles and crashes by pushing interest rates too low or too high for too short or too long of time.

    Who regulates the regulators at the Federal Reserve to keep the people safe from it and its mistakes? The only real regulator possible is the free market.

    With the Federal Reserve in place the market becomes the judge of the Federal Reserve decisions, rather than the regulator.

    The Federal Reserve in essence aids debtors and punishes savers. A depreciating dollar aids debtors and harms savers. An appreciating dollar aids savers and harms debtors.

    Abolish the Federal Reserve, the FDIC and all bank regulations except one; require full disclosure on full or fractional reserve backing of deposits. Treat gold, silver and cryptocurrencies as legal tender (not as an asset) for tax purposes.

  21. If you are concerned about the growing income inequality gap, if you are against war, against the military?industrial complex, against mega-mergers of companies and against invisible taxation, then you are against the Federal Reserve.

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  23. My experience with financial self regulatory “agencies” is that they are so obsessed with maintaining the independent legitimacy they profess and by implication their existence that these organizations, such as the Fed and FINRA, become obsessed with minutiae and lose sight of the big picture…..the victim then becomes the greater good itself.

    Like all bureaucracies, government, business or self regulatory, these organizations are mostly concerned with their own power and existence, the rest of us are on our own.

  24. Start working at home with Google! It’s by-far the best job I’ve had. Last Wednesday I got a brand new BMW since getting a check for $6474 this – 4 weeks past. I began this 8-months ago and immediately was bringing home at least $77 per hour. I work through this link, go? to tech tab for work detail,,,,,,,

    http://www.homejobs90.com

  25. Somehow I feel there will be a show about this on “American Greed” but the name of the show will have changed to “Chinamerica Greed”. I feel like they are engaged in the largest ponzi scheme ever, but also the largest counterfeiting scheme as well.

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