The Fed Explains the Central Bank

When you’re building something important,
you need a good structure. What will make it last? How’s it supposed to function? And, what will make it strong? That’s what the U.S. Congress was thinking about when they decided to build the Federal Reserve System. They needed to build something that would strengthen America’s economy and its banking system, so America could thrive. In 1907 the nation went through a
severe financial panic. So the U.S. president and Congress decided they needed a system that would help the economy run smoothly. A small group of nationally known politicians and financiers gathered at Jekyll Island, off the coast of Georgia. Here, they constructed the outline that became the Aldrich Plan for development of the Federal Reserve System. This meeting was held in 1910. And the charter for the Federal Reserve was signed
by President Woodrow Wilson in 1913. The plan envisioned a central bank that has
government oversight, yet works independently. This means it’s a central bank that can help keep the economy healthy, without pressure from short-term political interests. But the Fed alone doesn’t have all the tools
to keep the economy growing at a steady pace. The job is not one for a single organization. AND there’s a difference between monetary policy, the Fed’s province, which influences the economy by changing the supply and demand of money- and fiscal policy, the province of Congress, which uses tax and spending changes to affect the economy. So what does this mean to you? Well, the Fed is important because it keeps America’s
monetary system stable and growing with low inflation. And that allows people and businesses to make
better buying and spending decisions, which fosters further growth, which helps keep
the economy going in the right direction. But if the economy isn’t healthy, and money
is tight, people may be afraid to spend, and the economy won’t grow.
That’s hard on everybody. Today’s Federal Reserve System is made up of the Board of Governors based in Washington, DC and 12 regional Federal Reserve Banks
spread across the country. Every six weeks or so, members of these two groups meet: the Board of Governors, including the Chairman and the presidents of the regional Reserve Banks. At this meeting they discuss
and determine monetary policy direction. This meeting is called the
Federal Open Market Committee, or FOMC. The Federal Reserve has three important jobs. We call these functions the three legs of the Federal Reserve stool. It sets monetary policy through decisions that affect
the flow of money and credit in our economy. It contributes to the safety and soundness of our nation’s financial system by supervising and regulating banks. And It serves as a bank for depository institutions and
the federal government, helping the payment system work efficiently. In this capacity, the Federal Reserve System
serves as the “lender of last resort,” a place where banks can turn when
they can’t obtain credit elsewhere and their inability to obtain credit could
put the nation’s economy at risk. In carrying out these three functions, the Fed also
helps to contain risk that may arise in financial markets. Ultimately, it carries out its dual
mandate given by Congress in 1977. That is, to keep prices stable and
promote full or maximum employment. Americans have always been reluctant
to give too much financial power away. That’s smart. But we still need somebody
to foster conditions for a healthy economy. Since its founding in 1913, the
Federal Reserve System has done just that, evolving to meet the needs of our
changing financial system and growing economy. For more information about the structure
and function of the Federal Reserve Bank, check out our website at

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9 thoughts on “The Fed Explains the Central Bank

  1. My two cents as to what I think is happening…
    First I have to mention that:  The president is the punching bag for monetary policy even though he did not directly affect monetary policy.  The Federal Reserve is rarely mentioned on television as being the mastermind of the economy but nevertheless it is the second punching bag. That is to say another institution we can vent our anger when things go economically wrong. The real Culprits are the hidden owners of certain insider private commercial banks who have control of the Federal Reserve and the presidency. 

    The FEDERAL RESERVE was not created so that it profits.  RATHER it was created so that a select few private insider commercial banks become extremely profitable as the result of their ties to the FEDERAL RESERVE, and its ability to subsidize FRACTIONAL RESERVE LENDING.  These commercial banks control the Federal Reserve and its policies.  The FED, for example, carry out policies that causes little banks to fail.  These failed banks are taken over by the big insider banks furthering the consolidation of the nation's monetary reserve. 

    The manner in which banks create money ex niholo (out of thin air) is by the use of a scheme called fractional reserve lending.  When you rent a DVD movie, you are explicitly told not to copy and distribute the movie.  Why is that illegal?  Because if you copy and distribute the movie, the movie creators would loose profit as a result of the EFFECT of the counterfeiting. A long time ago it was decided that a deposit to a bank is legally a loan to the bank. Since case law (though English, but USA courts have followed almost similarly) established in 1811 (Carr vs Carr, in case you were wondering) that the money you put in your bank account no longer legally belongs to you – instead, you are lending it to the bank, which in turn is paying interest on the loan. Money is a fungible item, and it is not treated as a bailment when you deposit your money in the bank.  This means that if you have $100k and deposit it in a bank, the bank can loan the $100k to someone else.  What happens, though, is that the person that borrows the money soon uses it to buy something, a house, perhaps and the seller of the house takes that money and most likely deposits it in a bank, perhaps the same bank or a different bank.  What happens is that the bank that just received that $100k will loan that money out again, and the inflationary cycle continues.  The Money supply expands.  In this situation there are two conflicting titles to the money 1)the person that deposits it and 2) the person that borrows it.  This is precisely why the FEDERAL RESERVE was created, so that conflict can be reduced to a government/public subsidy. Further problem is that as the money supply expands, only the principle exist in the money supply.  In order for every borrower to pay back the debt, they need to depend on more credit to provide the interest payments. If the credit stops the economy goes into a recession-depression, and the money supply shrinks. This is officially called the BUSINESS CYCLE. The money supply created by private banks is over 95% of the money in the economy.  Just take the M0 money supply and subtract from the M2 or M3. 

    NOW there are two conflicting ideas about where income tax revenues goes.  The most elaborate, in depth research is the Grace Commission Report:
    "100% of what is collected is absorbed solely by interest on the Federal Debt … all individual income tax revenues are gone before one nickel is spent on the services taxpayers expect from government."
    -Grace Commission report submitted to President Ronald Reagan – January 15, 1984

    Then, there are reports from the government that show a pie chart of what the income tax revenues is used for:  38% goes to HUMAN RESOURCES;  30% goes to CURRENT MILITARY,  18% goes to PAST MILITARY;  8% goes to GENERAL GOVERNMENT;  and 6% goes to PHYSICAL RESOURCES.

    I really honestly do not know which is true, but what i do know is that the NATIONAL DEBT is fraudulent, because the treasury makes bonds which are purchased by private commercial banks using money from the selling of old bonds, and the multiplicity effect of  the fractional reserve scheme. In short these private commercial banks create the money out of thin air to buy the treasury bonds so that we can then use our labor to pay for interest on something they created out of nothing. This scheme is inflationary on both ends, the expansion of credit and the introduction of new money into the system.  If you are going to have an inflationary system why not for the public good, for public programs?

    These private commercial banks have been the mastermind of many business cycles.  Some as severe as the great depression where banks were loaning counterfeit receipts to actual gold reserves. On June 1929 There were 3 billion dollars worth of gold in banks, but there were 69 billion of  receipts (Federal Reserve Notes – pay bearer on demand ).  There is simply not enough gold in bank reserves to counter the gold receipts. People ran to the banks to redeem their paper receipt only to find out that there was no gold left.  In a credit currency economy the money eventually contracts exponentially. This spell economic disaster, which it did.

    Finally, we could falsely debate about the Fiat v Gold currency. The real debate lies in Fiat-Gold v Credit Currency, since Credit currency accounts for more than 98% of the money in circulation. The question then posed here is: HOW many times do you need to fall off your bicycle and idiotically hit your head in the pavement before you fix the floppy wheel in the front?  How many times do we need to have the same 'ol boom-burst cycles before we require a separation of bank and state, and the end of FRACTIONAL RESERVE LENDING? And more importantly how can you effect this when every key leading individuals are on the take?

  2. what makes a house strong? how about real things! lol that really balances the fiscal budget too, i promise! 

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