Greenspan, Volcker Opposed Ron Paul Audit Provision (say audit endangers price stability)

Inflation wouldn't be a problem with Greenbacks if fractional reserve lending were prohibited. That is, if a bank wants to lend $900, it must actually take $900 from its deposits and lend it, not use a $1000 reserve as the basis to create $900 in new money and lend it.

Making loans from deposits is fractional reserve lending.

The fact that there is always more money owed than money in existence means

There is also more money owned. So what?

Buying government bonds is the mechanism the Fed uses to start the money creation process. Interest must be paid on those bonds.

They could buy commodities instead. Would that make you happy?

Making loans from deposits is fractional reserve lending.

No, it is not. Creating new money and lending it based on deposits is fractional reserve lending - at least in modern banking. Here is the proof, from the Fed's own documents:
"Of course, they do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts." - Modern Money Mechanics

They could buy commodities instead. Would that make you happy?

No, the entire concept of private central banking needs done away with and replaced with a Constitutional money system, one in which those in charge are accountable to the American people and ALL functions are transparent.

It sounds remarkably like the John Law/ Weimar/ Zimbabwe school of money. Debt-free, government-issued, you just print your way to happiness.

Not so fast. The examples you cite are examples of private central banks. The 1930's Wiemar inflation, for example, was the result of Germany's private central bank and other commercial banks lending massive amounts of new money into existence.

No, it doesn’t prove your point, it negates your argument by illustrating that the amount of interest kept by the Fed is microscopic.

I stated that we pay interest on the creation of our own money. That we get most of it rebated does not negate that fact. But that leads to a larger question - why delegate money creation to the Federal Reserve in the first place? They are just creating it with a computer or printing press. What makes that OK if done by a central bank but not the government?

Treasury bonds are debt. Money isn’t. If the national debt were paid off tomorrow then Treasury bonds would disappear, but money would be still be with us.

All money is indeed debt, and all debt is indeed money. Treasury bonds are assets of the Federal Reserve and the currency or bank deposits they print or create to pay for the bonds are liabilities. Since assets and liabilities much balance out, if the Treasury bonds are paid back the currency or bank deposits must be withdrawn. That is why our national debt now stands at over $10 trillion - the old debt keeps getting rolled into new debt.

Making loans from deposits is fractional reserve lending.

No, it is not. Creating new money and lending it based on deposits is fractional reserve lending - at least in modern banking.

What is the difference between "if a bank wants to lend $900, it must actually take $900 from its deposits and lend it" and "Creating new money and lending it based on deposits"? Spell it out.

They could buy commodities instead. Would that make you happy?

No, the entire concept of private central banking needs done away with

But money would be created without interest. I thought that was the problem?

“Not so fast. The examples you cite are examples of private central banks. The 1930’s Wiemar inflation, for example, was the result of Germany’s private central bank and other commercial banks lending massive amounts of new money into existence. “

Weimar inherited the Reichsbank which had presided over a stable currency from its inception in 1876 until WWI. The Mark had been convertible into gold. Weimar suspended gold convertibility and issued a strictly paper mark. With no gold link to act as a brake it simply printed all the currency that it needed to accommodate the unworkable reparations payments. The German hyperinflation was the result of the Weimar government substituting political convenience for sound monetary policy, it wasn’t due to the existence of the Reichsbank.

America suffered a hyperinflation during the Continental dollar episode and a near 50% inflation from the Greenback issuance. In both instances the government acted as the monetary authority, there was no American central bank either public or private.

The presence of a private central bank does not cause inflation, nor does the absence of one mean that there will not be hyperinflation. The Bank of England has been in operation since 1698 and England has yet to experience a hyperinflation.

The Fed was authorized in 1913. The dollar was stable from 1913 to 1933, at $20 per oz. In 1933 FDR, not FED, devalued the dollar to $35 per oz. The dollar remained on a $35 per oz standard until 1971 when President Nixon closed the gold window allowing the dollar to float. The inflation of the 70’s followed. Again it was an America President, not the Fed, that devalued the dollar.

“why delegate money creation to the Federal Reserve in the first place? They are just creating it with a computer or printing press. What makes that OK if done by a central bank but not the government? “

The answer is above. Politicians have an incentive to debase money when they act as the monetary authority. Central banks don’t. Politicians aren’t willing to endure the recessions that monetary discipline demands, so they will break links to gold that limit easy money. An independent central bank doesn’t have to think in terms of the next election. The trick is to keep them insulated from political pressure.

“All money is indeed debt, and all debt is indeed money. Treasury bonds are assets of the Federal Reserve and the currency or bank deposits they print or create to pay for the bonds are liabilities.”

Lincoln’s administration passed the National Bank Act creating a national banking system. National banks were able to print and issue their own currency. In order to do so they were required to hold Treasury debt as the reserve base against their own money creation. How exactly is this different from the Fed monetizing Treasury debt to create high-powered money?

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