The Federal Reserve is not thinking of our best interest!
We never should have let these private banks control the $ in the United States.
Thomas Jefferson said we would end up homeless if we allowed the private banks to control the issue of money. Guess what, he was right and the time is here.
Very few people in the U.S. seem to know what is really going on at the Federal Reserve. So I decided to investigate it as I was one of the many confused citizens. Although I did not want to spend the time on this, I did and I hope you will spend the time to read this and then follow-up with some of the websites I have listed below.
The Federal Reserve has a lot of power to control money, has almost no oversight as Congress refuses to fully audit them, and no one in government can really tell them what to do. It appears what they are up to is making money for the bank owners while the citizens of the U.S. foot the bill with tax money.
When I saw the Federal Reserve was offering the following sweet deal below to the bank owners, I was frustrated enough to start digging into their history to try and figure out what is exactly going on here. It is hard to get good information too. They of course put out their own data but it does not give specifics that I or you would want to know. Specifics some senators such as Ron Paul have inquired about but have not been able to get answers to as congress will not pass his bills to audit the Fed.
What was that sweet deal I mentioned above? Right now the difference between short-term and long-term interest rates is quite wide. (Remember the Fed decides what the interest rates are.) Banks are taking advantage of it by borrowing money from the Fed at almost 0% and they turn around and reloan that money to the government by purchasing government T-bills with their newly borrowed money and get about 3.3% money on the T- bills as interest. (Why would anyone in their right mind loan someone money for free and then allow that person or entity to loan the money back to them with 3.3% interest? That is what is happening.) The Fed lowered the prime interest rate so the banks could borrow money from the Fed (money the Fed creates out of thin air) and then re-loan that money to businesses and individuals to get the economy going. Theoretically lowering interest rates would create liquidity. It would make money cheaper to borrow therefore it would facilitate lending to individuals and businesses. However, why would the banks loan to businesses and individuals when they can get 3.3% guaranteed interest from the treasury bills (interest paid with our taxes). It appears we are simply handing money over to the banks.
Of course if you look further you see that our country has to either default (go bankrupt) or do something such as sell T-bills. Since no one else will buy all the T-bills we need to sell, we are printing money via the Federal Reserve and having the Fed buy the T-bills. Why, you ask. Glad you asked. The reason is that the government is at this moment in time 1.2 trillion dollars in debt. The government’s debt is ultimately owned by you and I and future generations. You and I and all of the other individuals in the U.S. have only 600 billion in savings in the banks. This means the we have a 600 billion debt that we can’t pay off even if we all turned in every dime owned.
So what does the government do to make it look OK. It sells more treasury bonds to the Fed. Currently the Fed is buying 600 billion dollars in long term bonds. (usually the Federal Reserve buys short term bonds but they have already lowered the short term interest rate to nothing and it has not helped so they are now buying long term bonds to try to lower long term interest rates) Usually the Fed buys these bonds on the market rather than direct from the treasury as it appears they are doing now. The Federal Reserve Bank deposits an electronic credit into the bank or monetary institution that it buys the bonds from. This is not a credit that has money in the system to back it up. This is a credit that is created with a sweep of the hand. They introduce new money to the market either electronically like this or they have the Treasury print up money for them and then they can use it to purchase bonds. Either way new money floods the market. This is how they can introduce the 600 billion into the market from out of nowhere. (The only reason the U.S. is getting away with printing so much money is due to the U.S. dollar being the worlds main reserve currency and so many countries are holding U.S. dollars. Although there is talk in the world to abandon it as the reserve currency.)
The treasury now will need to pay interest on these bonds to the Federal Reserve. That is our tax dollars paying interest on these bonds that were bought with money created out of thin air. Banks who owned the bonds get cash from the fed electronically and the fed now has the bonds. This increases money in the money supply. This creates an increase in bond price and drives down interest rates on the bonds. Usually they purchase these bonds from a bank on the open market but recently it appears they are purchasing the bonds directly from the treasury department.
The Fed usually purchases only short term bonds but are currently purchasing long term bonds with this 600 billion they created in hope they can lower the long term interest rates. Unfortunately it will only lower the long term interest rates on treasury bonds, not the average business bond which they are trying to lower. The ten year interest rate on a treasury bond is about 3.3% while business bonds are more like 6%. They are higher as people are afraid to purchase them due to the fear of additional businesses going under. For some strange reason most people are not afraid of the U.S. government going under and they are willing to buy T-biills. (Even though we are as bad off as Greece is.) This attempt to lower the long term rates may not really work any way. What it does do though is drop the US dollar so we can sell more exports. A cheapened dollar also means the government is paying less to other countries when it repays its loans. Here is why. Let’s say the U.S. borrows $100 from China. But the value of the dollar drops by 20% from the time China loans the U.S. the money, and is paid back. The repayment is now only worth $80 comparatively. Lastly when the Fed buys treasury bonds it is buying Federal debt and makes it easier for the U.S. government to borrow more money. It keeps the never ending cycle going forward.
Who are these handful of private banks we have allowed to control our interest rates and the supply of money in our country. Why do senators like Ron Paul think the Fed is ruining our country and wants to audit them?
The collective of banks are known as the Federal Reserve. Contrary to what some people have been led to believe, the Federal Reserve is not owned by the government. It is made up of a core of 12 private banks who by law also allow other banks to become members. About 38% of U.S. banks are members of this system. The member banks must by law invest 6 percent of their capital as stock in the Reserve Banks, and they cannot sell or trade their stock or even use that stock as collateral to borrow money. They do receive dividends by law of 6 percent per year from the Reserve Banks and get to elect each Reserve Bank's board of directors. This 6% dividend they receive is money that is profit that is given to them rather than our government. If our government owned the central bank rather than private ownership we would not be paying 6% dividends to these banks. That money would stay in the government and lower our tax payments.
This is not their money they are making these dividends on. Remember the treasury prints money for the Federal Reserve and the Federal Reserve can electronically make money also. They use this money and we have no idea how they use it except for what they claim since we do not audit them. In addition our tax dollars pay interest on all the T-bills that they purchase with that made up money. Of course they do pay for bills that are printed. I am talking about $1, $5, $10, $100 bills and such. They pay the actual cost which is 4 cents currently. 4 cents for $100 bill. Hmmm. Of course they make a big deal out of the fact that they return all the profit to the government via the U.S. Treasury at the end of the year but they don’t mention the 6% dividends all the banks get first and the fact that the government has never audited them and does not really have any idea what they are up to and what the profit is other than what they are told.
So why do we have this bank and how did it start? Another good question. The answer is a bit lengthy. The private banks that make up the Fed have a voice in regulating the nation's money supply and setting targets for short-term interest rates. These decisions are made by the branch of the Federal Reserve called the Federal Open Market Committee, which has a dozen voting members, five of whom come from the banks. The remaining seven, a voting majority, are the Fed's Board of Governors who are appointed by the president.
The Federal Reserve derives its authority from the U.S. Congress as put fourth in the Federal Reserve Act of 1913 when it was created. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. (However congress does not do a full audit on the fed even though bills have been put fourth to audit them repeatedly, the bills are never passed.) The Federal Reserve is required to work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve lists itself as "independent within the government."
Good thing they created the federal income tax in 1913 also so the citizens of the U.S. could repay all the interest on the Federal Reserve’s loans it was going to make to the U.S. government in the ensuing years. The govt could never have borrowed so much money without the income tax to help repay it.
There were several failed attempts to create the Federal Reserve Banking Act by the bankers. Finally a group of bankers who funded and staffed Woodrow Wilson’s campaign for president were able to get it passed through Congress in 1913, just before Christmas when most of Congress was on vacation. President Wilson passed the act (Remember these bankers got him elected.) Later he voiced his sorrows over the system he allowed into power. The name the bankers chose for the system is deceptive. Federal leads people to believe it is a governmental organization and Reserve leads people to believe the money is all backed by gold and silver. The word System was chosen rather than bank so people would not realize a new centralized bank had been created.
A central bank might be a good thing for a country if it wasn't for the fact that they are not owned or controlled by the government of the country they are serving. All private central banks, including our Federal Reserve, operate for profit, not in the interest of the public good. The Fed will claim this is not true as they have to give all the profits back to the Treasury Dept. However, congress does not audit them. They do their own audits. I am sure they do not have any creative accounting going on to hide profit and rob the US tax payer. Congress has had legislation introduced to audit the Fed but it is ALWAYS defeated. Congressman Ron Paul has been after Congress for a long time to audit the Fed. Now that he is chairman of the House subcommittee on domestic monetary policy I hope he is able to show the Federal Reserve banks for the parasites that they are.
The other thing that Ron Paul wants to do is reintroduce gold and silver as legal tender in the U.S. Eventually, he wants to back the dollar with gold once again. The whole reason we were able to get into this financial mess in the first place is due to the uncoupling of the dollar from gold and putting the Federal Reserve in charge of the U.S. money.
To sum up: The U.S. government has an annual deficit. To cover this deficit the government issues bonds which are bought by the Federal Reserve. The Fed can electronically create money and even have the treasury print money and they have to pay only the cost of printing. They electronically credit banks on the open market for the purchase of governmental bonds or buy them direct form the government with the governments own money – odd huh. After purchasing these bonds on the open market the Fed can either keep the bonds and collect interest the U.S. govt owes them or sell the bonds to the U.S. taxpayers or foreigners. Every year the Fed profits by buying U.S. govt bonds with money they pay almost nothing to have made for them or that they electronically create. They return about 20 billion to the US Treasury and claim the rest as expenses. Who is going to argue since no one audits them. Not the IRS, not the government. Oh yes, I forgot they do hire their own auditing firm. However, should we really count that as a real audit?
Where does the money come from to pay the interest on the bonds that the fed just bought as well as the bonds themselves which will one day be redeemed? (Remember they paid the treasury very little for the bonds.) Yes, it comes from us, the taxpayers.
The banks that are members of the Federal Reserve system are also allowed to do “creative lending”. They are required to keep a certain amount of money in reserve at all times. However, they can loan you way more money than they actually have available. They do this electronically. They are lending you something they really don’t have and they make you secure it with an asset usually and repay it with interest. If everyone went to the bank all at the same time to retrieve their money it would not exist since only a small amount of it actually has to be held in reserve at any one time.
Well this is pretty much what I have put together at this point. I am not a financial advisor or an expert on the Federal Reserve but I will continue to gather data and share it in the future. Hopefully Ron Paul will be able to audit the Fed. I am behind him to abolish the Fed over time.
This is a short 5 minute video where Ron Paul exposes the Federal Reserve
This is a video everyone should watch. I have been following Catherine Austin Fitts for years. She has a lot of wonderful solutions as to how we can take back our economy and country. This video tells you what the problem is as many people don’t realize why things are as they are.
For a historical perspective on how the fed came to be go here:
Interview with Ron Paul about the Fed
Back in 2002 Ron Paul warned we needed to abolish the Fed.
Here is updated info from Ron Paul
