The Federal Reserve – Who are They? (Part 1)

November 6, 2013 – One compelling issue that has been seeping into the analysts, lobbyists, researchers, political bloggers, and FX portfolio managers corner is – The U.S. Federal Reserve banks, aka “the Fed”. Are they privately owned by other major banks, or by the U.S. Federal Government? What is their key role? Do they print money for federal spending? What would happen if the Fed was to shut down permanently? These are questions that a few major Forex and Stock traders ask themselves. If it does shut down for some sort of reason, other than after reading this controversial article; how will it affect the U.S. Dollar and the Greenback currencies in the market place?

Unfortunately, many traders or investors or the general American public don’t really think about the Fed much. The truth is the Fed is a banking cartel that systematically destroys the value of the U.S. dollar, drains the wealth of the American public and enslaves the Federal Government to continue to increase debt.  This is one of the major facts of the Fed and how they run the country. A lot of blame should be placed on the Fed instead of President Obama and John Boehner’s quarreling over implementing Obamacare and vetoing expanding the federal debt ceiling.  In truth, getting to the core of the issue is the Fed has more power over the performance of the U.S. economy than anyone else does.  How is this possible? They control the money supply, set interest rates, bails out the retarded gorilla banks on Wall Street that in effect dwarf anything that Congress ever did to get to the nucleus of the economic problems in the U.S. One major fact is that the Fed is privately owned, but is controlled by publically-appointed Board of Governors. The Fed also executes the monetary policies, collects the interest on Government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed.  Now, who owns the Fed? It is privately owned by banks that are members of the Federal Reserve System. We do not know how much of the system each bank owns, because it’s never been disclosed to the public. When Bloomberg undertook its inquiry under the “Freedom of Information Act”, the Fed stated unequivocally in court that it “was not an agency” of the federal government and not subject to the Freedom of Information Act. Speaking of ownership, some foreign governments and foreign banks do own a significant ownership in the member banks that own the Federal Reserve System. So it’s pretty accurate to say that its partially foreign-owned. Well, now to discuss the national debt, the Federal Reserve System is a perpetual debt machine.

 

As long as the Fed exists, the U.S. government debt will continue to go up and up and up. The way the system works, whenever more money is created more debt is created as well. For example, whenever the U.S. government wants to spend more money than it takes in (which happens all the time since Vietnam), they crawl to the Fed. The government gives Treasury bonds to them, and they give the government “Federal Reserve Notes” in return. So where does the Fed get these notes? They create them out of thin air. Instead of the government creates it, they let the Fed do it and they borrow it. Talk about stupid.  When new debt is created, the amount of interest that the U.S. government will eventually pay on that debt is not also created. So where does that money come from? Well (sigh), eventually the U.S. government will have to go back to the Fed to get even more money to finance the ever-expanding debt ceiling that has gotten out of control (17 Trillion). The reality is that the money supply is designed to constantly expand under the Federal Reserve System. That is why we have inflation and that the Americans think it’s normal.  So what does the Fed do with the Treasury bonds that they are holding? They sell them off as debt to other investors, such as China, Saudi Arabia, Russia and the like. They have made a ton of money holding this debt security. In fiscal 2011, the U.S. government paid out 454 billion just in interest on national debt. Where did the wonderful U.S. government get this money? You guessed it! Joe Taxpayer. So the everyday American citizen is paying investment interest to wealthy individuals and foreign governments around the world.  In short, the current U.S debt-based monetary system was designed by greedy bankers that wanted to make enormous profits by using the Fed as a tool to create money out of thin air and lend to the U.S. government at interest. Working quite well I must say or Gordon Gekko would say “capitalism at its finest”. On July 1, 1914, shortly after the Fed was created, the federal debt was 2.9 billion, now it’s 17 Trillion.

 

For Part 2 of this segment, you will see how the banking system of debt affects us on a more personal level of deposits and loans.