Sigh... OK, sorry, Robin, I'm 'way hazy on the details of currency printing and I should probably have stayed out of this.
I'll try to produce a coherent reply to this tomorrow. As far as I know congress has indeed delegated creation of money to a private entity, as a consequence of which the Federal Government is beholden to the Fed. Whether that's slavery or not is another question. [EMAIL PROTECTED] wrote: > In reply to Stephen A. Lawrence's message of Fri, 28 Nov 2008 20:51:34 -0500: > Hi, > [snip] >> In short, the books must balance. > [snip] >> If I recall correctly it's ordinary banks which are "tasked" with >> replacing old bank notes with new ones; they send the old ones back to >> Treasury where they are (supposed to be) destroyed. This is also a >> zero-sum operation ($1 old -> $1 new) > > this appears to be contradictory to ... > >> but I can't tell you anything >> about the security of the operation, nor the details of how they assure >> that the old notes are really destroyed rather than being siphoned off >> to some needy cause in Colombia. >> >> In economics class, I once asked about "lost" money, dollar bills burned >> up in fires or run through the washer and no longer usable. As far as I >> could tell from the blurry answer I got, the amount of "destroyed" >> currency is so small compared to the rate of money supply growth in >> general that it's simply not an issue. The whole system is grossly out >> of equilibrium (the money supply grows continuously) > > > ...this. > >> and probably >> couldn't function "in equilibrium" anyway, which is the only time it >> would really matter that some funds are simply vanishing each year due >> to destroyed currency. >> >> Unlike all other federal agencies, the Federal Reserve Board is *not* >> constrained to running a zero-sum operation. They can actually create >> money. They must keep careful track of how much money they create, but >> none the less the only constraint on them, as far as I know, is their >> good sense (and the threat that if they step out of line Congress and >> the President can always fire them). They're not politicians, so they >> have more "good sense" than is usual for the White House and Congress, >> which is why the system works as well as it does (as always, contrast >> with Zimbabwe where the president has direct control of the money supply >> -- that approach doesn't typically work as well). >> >> As I recall, when the Fed has a burning desire to create more money, >> they do it by purchasing government securities. In other words, the >> Treasury "borrows" money, as usual, by selling bonds, but in this case >> they sell the bonds to the Fed, and the Fed uses "magic money" to buy >> the bonds. The magic money never existed before the bonds were >> purchased, which is what makes it magic. > > This doesn't make sense if it's the Treasury printing the bills. According to > the Wiki article, the Fed uses securities to obtain bills from the Treasury. > Now which way around is it? (Or is it both?) ...and if the Wiki is correct, > then > why are they "Federal Reserve Notes", if they are printed by the Treasury? > >> If I recall correctly this is >> typically done through the "open market desk" and is referred to as an >> "open market transaction". As I said, they need to keep track of these >> purchases, and in fact someplace in the back pages of the Wall Street >> Journal you can (or could, before Fox bought it) find a tally of how >> much government debt is "owned" by the Fed. > > This reads as though a private company creates money out of thin air, which > the > government then "borrows" perpetually putting the people of the US into debt > to > the private company, with no real benefit in exchange for the debt. > Freely translated, this is highway robbery, on a scale so grand as to dwarf > the > imagination of Joe Sixpack, thus allowing it to continue indefinitely. That > would mean that the US population is in consequence a slave population. > > Regards, > > Robin van Spaandonk <[EMAIL PROTECTED]> > >
