11 Reasons Why The Federal Reserve Is Bad

11/4/10 11:54

The Horrific Derivatives Bubble That Could One Day Destroy The Entire World Financial System

22 Statistics About Americas Coming Pension Crisis That Will Make You Lose Sleep At Night

11 Reasons Why The Federal Reserve Is Bad

Millions of Americans are waking up to the fact that the Federal Reserve is 68 bad, but very few of them can coherently explain why this is true. For tweets decades, an unelected, privately-owned central bank has controlled America's retweet currency, run our economy and has driven the U.S. government to the brink of bankruptcy. It operates in great secrecy, it has never been subjected to a comprehensive audit and yet the actions it takes have an impact on every single American. It is an institution designed to drain wealth from the U.S. government (and ultimately from the American people) and transfer it to the ultra-wealthy. Have you ever wondered why a sovereign nation such as the United States has to borrow United States dollars from anyone? Have you ever wondered why a sovereign nation such as the United States does not even issue its own currency? Have you ever wondered why we allow a group of unelected private bankers to run our economy? Those are some very important questions. Hopefully what you are about to read will open the eyes of many. The truth is that our financial system is centrally-controlled and centrally-managed by a group of banking oligarchs who have constructed an everexpanding debt spiral which has been efficiently designed to slowly transfer all wealth into their hands. The following are 11 reasons why the Federal Reserve is not good for the United States.... 1 - The Federal Reserve was created as a way to enslave the U.S. government with debt. The truth is that the U.S. government only goes into debt if it chooses to. Theoretically, one day that U.S. government could simply decide to print as many U.S. dollars as it wants and pay off all government debts. But under the current system that is not allowed. You see, today the U.S. government does not issue any money. The Federal Reserve issues all money. That is why they are called "Federal Reserve notes". Under the current regime, whenever the U.S. government wants more currency to be created it has to go into more debt. In a previous article entitled "It Is Now Mathematically Impossible To Pay Off The U.S. National Debt" I explained how this insidious system works.... If you will pull a dollar bill out and take a look at it, you will notice that it says "Federal Reserve Note" at the top. It belongs to the Federal Reserve. The U.S. government cannot simply go out and create new money whenever it wants under our current system. Instead, it must get it from the Federal Reserve. So, when the U.S. government needs to borrow more money (which happens a lot these days) it goes over to the Federal Reserve and asks them for some more green pieces of paper called Federal Reserve Notes. The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. The Federal Reserve either sells these U.S. Treasury bonds or they keep the bonds for themselves (which happens a lot these days). So that is how the U.S. government gets more green pieces of paper called "U.S. dollars" to put into circulation. But by doing so, they get themselves into even more debt which they will owe even more interest on. So every time the U.S. government does this, the national debt gets even bigger and the interest on that debt gets even bigger. Now, apologists for the Federal Reserve system are quick to point out that the Federal Reserve does not make much of a profit. Once a "statutory dividend" of 6% is paid to member banks and a capital account surplus is "maintained", the rest of the profits of the Federal Reserve go back to the U.S. Treasury. Problem solved, right? Wrong. The point is not how much of a profit the Federal Reserve makes or does not make. The point is that the Federal Reserve is a tool for creating U.S. government debt which slowly drains our national wealth and which ends up greatly enriching the global elite. As of July 1st, the U.S. government had spent $355 billion so far in 2010 on interest payments to the holders of the national debt. Have you ever wondered who gets all that money? The truth is that the wealthiest individuals around the globe have been getting very rich for a very long time off of government debt. 2 - The Federal Reserve creates money out of thin air. In a previous article , I noted how this fact comes out in congressional hearings and yet the American people just don't seem to get too upset about it.... During a recent Joint Economic Committee hearing on Capital Hill, U.S. Representative Ron Paul directly confronted Federal Reserve Chairman Ben Bernanke about this 1.3 trillion dollars. As Ron Paul described how this 1.3 trillion was just created out of thin air, all Bernanke could do was nod his head. Why? Because it was the truth. 3 - The huge predator megabanks that now dominate the U.S. banking system use the Federal Reserve as a tool to make money. One of the ways they do this is called the U.S. Treasury carry trade. What happens is that the Federal Reserve lends huge amounts of money to the megabanks for next to nothing, and then these megabanks use all that cash to buy U.S. government debt. This little "trick" helped enable four of the biggest U.S. banks (Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup) to have a "perfect quarter" with zero days of trading losses during the first quarter of 2010. Wouldn't you like to have a perfect batting average?
http://theeconomiccollapseblog.com/archives/11-reasons-why-the-federal-reserve-is-bad Page 1 of 4

11 Reasons Why The Federal Reserve Is Bad

11/4/10 11:54

4 - The Federal Reserve devalues our currency. Since the Federal Reserve was created in 1913, the U.S. dollar has lost 96 percent of its purchasing power. The truth is that just a two percent inflation rate will wipe out half of your purchasing power within a single generation. In the chart below, you can clearly see that the beginning of the rapid rise of inflation in the United States coincided with the creation of the Federal Reserve....

5 - The Federal Reserve manipulates the U.S. economy by setting national interest rates. By keeping rates high or low, the Federal Reserve has the power to create economic growth or to destroy it. The have the power to inflate massive bubbles and to pop them. Most Americans give way too much credit and blame to presidents like Bush or Obama for how the economy is doing. The truth is that they really don't have that much control over the economy compared to the Federal Reserve. 6 - The Federal Reserve also controls the national money supply. They can pump trillions into the economy or pull trillions out without being accountable to anyone. This can have disastrous consequences. For example, after the U.S. stock market crash of 1929, the Federal Reserve continued to contract the money supply. Many analysts believe that this was one of the key things that precipitated the Great Depression. 7 - The Federal Reserve is not part of the U.S. government. The truth is that the Federal Reserve is about as "federal" as Federal Express is. In defending itself against a Bloomberg request for information under the Freedom of Information Act, the Federal Reserve objected by declaring that it was "not an agency" of the U.S. government and therefore it was not subject to the Freedom of Information Act. It is kind of funny how Fed officials are always talking about how important their "independence" is, but whenever anyone starts criticizing them for being private they start stressing their ties with the government. 8 - The Federal Reserve has become far, far too powerful. The reality is that those running the Federal Reserve are not elected and yet have an enormous amount of control. In fact, Ron Paul recently told MSNBC that he believes that the Federal Reserve is more powerful than Congress..... "The regulations should be on the Federal Reserve. We should have transparency of the Federal Reserve. They can create trillions of dollars to bail out their friends, and we dont even have any transparency of this. Theyre more powerful than the Congress." 9 - The Federal Reserve is dominated by Wall Street and the New York banks. The New York representative is the only permanent member of the Federal Open Market Committee, while other regional banks rotate in 2 and 3 year intervals. The former head of the New York Fed, Timothy Geithner, is now U.S. Treasury Secretary. The truth is that the Federal Reserve Bank of New York has always been the most important of the regional Fed banks by far, and in turn the Federal Reserve Bank of New York has always been dominated by Wall Street and the major New York banks. 10 - Federal Reserve Chairman Ben Bernanke wants to completely eliminate minimum reserve requirements for banks. Fractional reserve banking has always been a way that the bankers have conned the public, but now Bernanke wants to get rid of the pretense of "reserves" altogether. It is almost too bizarre to believe, but it is right there in black and white on the Federal Reserve's own website.... The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system. 11 - The Federal Reserve is not accountable to anyone. The Federal Reserve has never undergone a true comprehensive audit since it was created back in 1913. Ron Pauls proposal to audit the Federal Reserve, which had previously been co-sponsored by 320 members of the U.S. House of Representatives, ultimately failed by a vote of 229-198. But shouldn't the American people be able to see what is going on inside the Federal Reserve? Shouldn't we have some way to keep them accountable? After all, they have an incredible amount of power over us, shouldn't we have at least a little bit of power over them? Unfortunately, the truth is that they desperately do not want light to be shined on the elaborate "shell game" that they are running. Have you ever wondered if it was just a coincidence that the personal income tax was implemented just about the same time that the Federal Reserve was created? Why does the U.S. government have to tax us? Why can't the U.S. government just print up all the money that it needs? Well, the way that our Congress spends money that would probably create horrific hyperinflation, but that is the subject for another article. The point is that the U.S. government should not have to get U.S. dollars from someone else. If you take a few minutes to stop and think about it, an America where there is no Federal Reserve, no personal income tax and no IRS is not

http://theeconomiccollapseblog.com/archives/11-reasons-why-the-federal-reserve-is-bad

Page 2 of 4

11 Reasons Why The Federal Reserve Is Bad

11/4/10 11:54

that hard to imagine. If the U.S. government functioned just fine without all of them at one time, then why couldn't the U.S. government function just fine without all of them now? The system we have now clearly is not working. The Federal Reserve was supposed to guarantee that our financial system would be perfectly stable, but in reality our financial system has become much more unstable. It is time for different thinking. It is time for the U.S. government to take back control of our currency and of our economy. It is time to start electing some people with common sense to represent us in Washington. So what do you think of the Federal Reserve? Feel free to leave a comment with your opinion.... Share and Enjoy:

Tags: Banking, Debt, Debts, Federal Reserve | Category: Banksters

51 comments to 11 Reasons Why The Federal Reserve Is Bad

Older Comments 1 2

dale young
September 9th, 2010 at 10:59 pm Spencer1. I think that youre correct in saying that if this power was given to the Federal Government, that we would have far more likelihood to simply hyperinflate away our deficits. However, this argument completely misses the fact that the Constitution requires a different money system. We are currently playing word games with the Constitution when we say that it isnt the government (because the FED is private) that is printing the money, so its okay. A Constitutional currency is gold and or silver. All that government is allowed to do is to regulate its value and stamp the coins; in other words, they may decide how many ounces of gold or silver should be in a given coin. 2. Saying that the same thing happens when companies dilute their shares does not justify the practice. In actuality, there is a difference. When shares are diluted, all holders benefit (or suffer) at the same time, with inflation, the first spenders (the government) get the full value of the money but those who are further removed receive less value per dollar. Again, the Constitution says that Counterfeiting is a serious crime, on a par with treason, actually punishable by death, although this is pooh-poohed today. Can you really argue that there is an effective difference between the counterfeiter and the Fed? Both inject money into the system, which robs everyone of value, both actions accrue benefits to individuals, rather than all people equally. The destruction caused by a fiat regime is real and we will certainly see much more of that in the not too distant future. Its destruction is not limited to transferring the wealth of ordinary people to powerful elites, but in the damage that it has caused to our sovereignty and more subtle damage to the country such as its encouragement of government corruption, foreign policy and the destruction of savings. All of these points are controversial, but I believe arguably have merit. 3. There is nothing illegal about this, but that is not the same as saying that there is nothing morally wrong with encouraging well connected banks and financial institutions, all of which represent the most sophisticated financial acumen in the country, to profit at the expense of the average American and then borrow from our grandchildren to allow them to stay in business and pay their bloated bonuses. When crooks are writing the laws and enforcing the regulations then it is not surprising that it is legal, but it clearly is immoral. All of the institutions involved in the crisis deserved to go out of business. That is capitalism. But they are not capitalists. 4. Greater prosperity? Fewer runs on banks? Who is oversimplifying? That wasnt even the subject of the point. The point was simply that the Fed has devalued the currency. That is a fact. Failing to address that fact, you brought in other observations. But one of the Feds own stated goals is to stabilize the currency. If by stabilize the currency they meant to steadily devalue it, then they should have said so. Of course most economists agree. 99% of economists are Keynesians or a monetarist subgroup, both of which think that inflation is a wonderful thing. What you are arguing is that, while it is clear that the author is correct in saying that the currency has been devalued by over 95%, you think that this has had a beneficial effect on our standard of living and on balance it has been a good thing. You oversimplify when you say that the 20th century has had the most prosperity and least runs on banks. It can just as easily be argued that bad banks going out of business are actually a healthy thing for the economy as a whole. The damage caused by the deepest and longest recession in history (so far) seems insignificant in your analysis. While I agree that Roosevelt and Hoover deserve much of the blame, it could not have happened without the Fed. The Fed set up the bubble, the Fed helped pop the bubble, the Fed encouraged and allowed government to deficit spend during the Depression which gave Roosevelt the rope to hang the country. almost every other country in the world emerged from the depression in less than two years. The Depression lasted 10 and the Feds policies encouraged it. 5. I dont disagree with your contention that politics deserves a raspberry. But to say that the Feds role is to ensure bubbles dont occur is laughable. So, easy money didnt contribute to the dot com bubble, or to the housing bubble? Youll have to pick and choose your economists pretty carefully to be able to find backing for that contention. I think it is just as likely that most politicians take their marching orders from the Fed than they push the Fed into acting the way they want. Most of the Cabinet and much of Congress are tied closely to the banking lobby. Can you find many meaningful examples of Congress or the Executive opposing those lobbies? Sure, theres an occasional banking regulation bill that comes through, but most of those are written by the banking industry to further solidify their grip on power at the expense of competition. The current bill is no exception. Your contention that if they did what they were supposed to do, then wed be in good shape is simply propaganda from the Feds fan club. 6. I disagree that this power is what prevents runs on banks. I think the author is correct when he says that this power contributes to booms and busts. The runs on banks thing is a separate issue. That is chiefly handled today by consolidation of banks, by Congress allowing banks to ignore their true balance sheets and by not requiring any reserve requirements. Not mentioned is the fact that essentially large banks are given free money (at taxpayer expense) to park the money with the Fed instead of loaning it out. Naturally they cry crocodile tears and wring their hands about the lack of loans being made. The Fed is simply a banking cartel, which is setup to allow banks to cooperate with government to discourage competition. It is a mutually beneficial arrangement, but it does not benefit the American people. When you say that it does, I think you neglect many valuable features that hard money systems bring to the table, but that requires a much longer discussion. 7. You are correct. But it is far more private than it is public. The current debate about an audit merely underscores that. We do not even have a full list of the owners of the Fed. Originally it was kept secret. We know that member banks are owners, but there are other owners as well, many of whom are likely to be foreign. So our central bank may be largely in the hands of foreigners. Thus, we can be confident that the Fed always acts in the interest of the USNOT! 8. You are again right. If everyone knew what the Fed knew, there would be less trust in the system. Ponzi schemes are like that. Your

http://theeconomiccollapseblog.com/archives/11-reasons-why-the-federal-reserve-is-bad

Page 3 of 4

11 Reasons Why The Federal Reserve Is Bad

11/4/10 11:54

argument that knowing what the Fed knows would result in hoarding and prevent the economy from moving forward is total bullshit. Of course there would be hoarding of hard assets, because with a Ponzi scheme, the thing is going to fail eventually. Only an idiot wouldnt want to protect themselves. But most people deal with their local banks. No individuals deal with the Fed, and every one of those banks is required to disclose their books. You dont see people freezing up and refusing to go outside because of it. But when this Fiat mess comes falling down, then youll see people afraid to move; and history is definitely on my side here. 9. You are probably right here. The system was set up to consolidate power to the New York branch, even though sold to America as being decentralized (just another little white lie). Im not sure about the gold reserve. My understanding is that the gold belongs to the people. It should be in Fort Knox as an asset of the people. There is really no reason that I can think of that the Fed should have any gold of its own. Our currency is not tied to gold. It is a fact that the Fed manipulates the gold market to fool people into thinking that the currency is more stable than it really is, but I dont know why the Fed would have much gold unless its a legacy from prior to 1971, when we would have to pay foreigners gold, but werent allowed to own it ourselves. 10. I disagree here. I think it is basically dishonest. Certainly its historical roots are based in deception and I dont think that there is really anything different today. The fact that it is well known, legal and standard practice for the industry notwithstanding. If its that good for us, why not let anyone do it? As long as no one recognizes a Ponzi scheme as such, and there are no runs on the bank, there will never be a problem. But, you neglect the misallocation of resources. You neglect moral hazard. True, these things are difficult to exactly quantify, but when you step back and look at a country that is the largest debtor in the world, its pretty clear that we have lost our way. In your utopian world, you seem to think that someday mankind will reach the point where they blindly accept whatever they are told at face value. There is no evidence that any society will ever achieve that sort of trusting belief, nor any reason to believe that it would be in their best interest to do so. True, it is in the best interests of the banks and the Fed and their owners, but that is different. It is a con to say that were it not for fractional reserve banking, wed all be milling grain. Hard money systems existed for thousands of years, with much greater stability than fractional systems allow. The system of credit that you forget, which is far superior to the fractional reserve system is the Real Bills system as expounded by Adam Smith. Under this system, there is enough money for business to operate and less misallocation of resources. 11. Again, I think your argument against transparency is bullshit. JP Morgan and his friends were powerful enough and strongly suspected in causiong the panic of 1907 and grandly offered to solve it. It was this crisis which was used as the rationale for the Feds creation. JP Morgan had a representative on the secret committee which created the Feds charter and was instrumental in its design. Upon his demise, it was discovered that his real power came from English banking interests for whom he was their front man. While I wont say that the government wasnt greedy in 1913, it is nothing compared to the greediness which government has achieved today, largely with the encouragement of the Fed, which has tempted Congressmen with easy money since 1914. I think youre right again that the authors ideas, as well as mine, are probably going to be impossible to put into practice until the current regime utterly fails. I suspect that we wont have long to wait in that regard. It is my hope that we return to a hard money system when that occurs. It is my contention that the instability in the money system can be traced to fractional reserve banking and reaches its zenith with the Fed cartel in collusion with government. Together, these create the boom/bust cycles of recession and depression, they transfer vast sums of wealth to a hidden elite, they serve to destroy our sovereignty and systematically seek to enslave billions both at home and around the world in the chains of debt.

Older Comments

http://theeconomiccollapseblog.com/archives/11-reasons-why-the-federal-reserve-is-bad

Page 4 of 4