Replies

Could you please explain further what exactly the Fed does that's so bad?

In a nutshell, here's how FRNs (Federal Reserve Notes) are monitized: The Bureau of Engraving and Printing prints up a bunch of FRNs. Let us say, in this example, that it is $1,000,000 in $20 bills. That is 50,000 $20 bills. The FedGov sells these 50,000 notes to the Fed for aproximately $1500. (4¢ each.- Roughly the cost of printing) The Fed then loans these back to FedGov at face value, thus creating a debt $998,500. This debt is an obligation generally in the form of T-Bills or other instruments that is backed by the "full faith and credit" of FedGov. The bottom line meaning of that term, "full faith and credit" is FedGov's ability to tax you and I at whatever level they think is appropriate.

This is how part of this works in a nutshell and is based on research I did about 15 years ago, so you'll have to bear with me on any discrepancies. I Googled around a bit and came up with a few links that talk a bit about how some of this stuff works. Granted, many of the hits were from folks wholly in the camp of those who want to see a return to hard currency, as is demanded by the Constitution, but some of their concerns, and much of the descriptions given of how things work are valid.

I don't think our economy could operate efficiently at this point on a metallic or bi-mettalic standard. Liquidity would suffer too much from it IMO, but at the same time, the implications and results of fiat money aren't altogether good things either.

I do not like the power the Fed takes upon itself to restrict the growth of the United States to a narrow band that they deem to be sustainable. In too many periods of our history, this restrictive stance has hurt the people of this country much more than was necessary. The power they have over the money supply is too easily manipulated for political gain. IMO, the recession of Bush 41, which was largely responsible for Clinton's election, was a creation of an overly restrictive Fed (with a lot of collusion on the part of the MSM).

One document about the federal reserve system is "Modern Money Mechanics", which was published by the Chicago Federal Reserve Bank. You might be interested in reading it.

Let us say, in this example, that it is $1,000,000 in $20 bills. That is 50,000 $20 bills. The FedGov sells these 50,000 notes to the Fed for aproximately $1500. (4¢ each.- Roughly the cost of printing) The Fed then loans these back to FedGov at face value, thus creating a debt $998,500.

Now I understand your confusion. The Fed loans $1,000,000 to the FedGov. Now the FedGov has a liability of $998,500 and an asset of $1,000,000.

Doesn't sound like such a bad deal. You have a better objection?

Thanks for the link. I'll take a look.