Interesting Coin
Why do we pay interest on the money loaned by the Federal Reserve, when Congress can coin money @ no interest?
Inflation is a sneaky tax on the people
It is conspiracy theory nonsense stating that the Federal Reserve loans all of the money the government needs to the government. The U.S. Government borrows money by issuing and selling at auction U.S. Treasury securities. These are known as T-Bills, T-Notes, and T-Bonds. Anyone may buy these securities at the auction, even you.
The holders of the U.S. Treasury securities are the ones that receive the interest paid by the government. A large portion of the debt is actually held by government trust funds. Therefore, a large portion of the total interest expense is actually paid to the government itself.
The Federal Reserve actually only holds about $800 billion of the total U.S. Government debt. In 2009, the Federal Reserve earned approximately $29.2 billion in interest on the U.S. Treasury securities that it holds. It paid to the U.S. Treasury approximately $45.1 billion. The reason that Gray Shadow and I know this is because we read the INDEPENDENTLY AUDITED financial statements of the Federal Reserve. The claim that the Federal Reserve has never been audited is a MYTH. Complete financial audits are a part of the Federal Reserve annual reports to Congress. The audits are conducted by one of the four major accounting firms.
The Treasury securities held by the Federal Reserve are bought by the Fed on what is known as the secondary market. When the government issues Treasury securities, they have a maturity date. The government will not redeem the security until the maturity date. Therefore, if a person or other entity wants to get cash for the security before the maturity date, they have to sell it on the open or secondary market. The Federal Reserve uses the ability to buy (and sell) Treasury securities on the secondary market to make adjustments to the overall money supply.
Also, the total interest paid on the U.S. Government debt in FY 2009 was $383 billion. The $700 billion figure quoted by Jack is WAY OFF.
Finally, another poster mentioned EO 11110 signed by President Kennedy. If the person would actually read it and if they had the ability to comprehend the English language, he or she would learn that the EO actually only delegated to the Secretary of the U.S. Treasury a power that the President already had. That power was the ability for the President to direct the U.S. Treasury to issue silver certificates in various denominations. The President had that power since 1933. However, there was a statutory limit on the amount the Treasury could issue. Even in the 1960s, the total amount of $3 billion was not enough to fund the nation’s money supply. The claim that Kennedy was assassinated because of the EO is conspiracy theory nonsense.
One final comment: another poster mentions a quote by Woodrow Wilson where President Wilson supposedly states that he unwittingly destroyed the country. This quote is widely attributed to him making it in 1919. The quote and the date are both FALSE. Portions of the quote can be found in Woodrow Wilson’s book, “The New Freedom”. However, the quotes were not referencing the Federal Reserve. “The New Freedom” is a compilation of various campaign speeches that Woodrow Wilson made on the campaign trail in 1911 and 1912, at least a year before the Federal Reserve act was signed.
If you want to complain that the government spends too much. I agree with that. However, blaming the Federal Reserve for that is simply misplaced nonsense. Also, if you think a politician would be responsible for maintaining a reasonable money supply with low inflation, you haven’t been paying attention.
Coin Collecting For Fun and Profit