On the Federal Reserve

To touch on a political note...not to spend too much time on it, but reduce it to it's basic elements. This is the sign of good and unbiased teaching. Dare I say there is not a lot of it happening in the United States...just my opinion.

To quote the Fed on the Fed, "The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects."

So the Fed is not "owned," according to the Fed.

And to continue the conversation the Fed says of itself "The Federal Reserve's income is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. Other sources of income are the interest on foreign currency investments held by the System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions (the rate on which is the so-called discount rate). After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury."

So, the Fed is profitable, after expenses.

Let's put two and two together. The Fed is not owned, but is profitable. How does this add up? In order to be profitable, you have to have a business. Every business that I know of is owned. Quasi owned, is still owned.

This, for me, lays a foundational seed of mistrust.

To add to the frustration it makes money by lending the US government money. From many reasonable perspectives the borrower is servant to the lender. If I owe you money, you have something over me. And it takes "someone" to lend money and that "someone" "owns" the money.

There is one more aspect with regard to the legislated role of the fed: "* conducting the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices
* supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers
* maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
* providing certain financial services to the U.S. government, to the public, to financial institutions, and to foreign official institutions, including playing a major role in operating the nation's payments systems"

So they print money to lend to the US government and then make money off of the interest.

Is there a conflict in there...somewhere?

Now, I will admit that the situation is complex primarily through the actual and theoretical conflicts between private and public interests. Banks runs are painful regardless of one's philosophy. However, I have found that for all of the complexities we find in life, there are always simple elements of which they are comprised. Call a spade a spade.

Somehow I think I went into the wrong business. What a business to be in: to make money by taking a cut of tax revenue as interest. This is the best passive income a government can legislate to an elite group of rich folks. Power to the people :)

And by the way the securities are purchased in the "open market." Maybe I'll by a US government bond, but wait, I can't print the money to buy the bond...I actually have to work for it.


Sources:
http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm