Question about US Government buying back the Federal Reserve

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authentic8's picture
authentic8
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Joined: Oct 11 2010
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Question about US Government buying back the Federal Reserve

The Crash Course really opened my eyes in many respects to do with money and the global economy but I still consider myself very much a newbie on these topics.

There is an article I came across a few days ago that quite surprised me. It can be read at http://www.federalbudget.com/fed.html

Now a lot of what it says is probably well-known and without controversy, but it makes a claim under the heading "WHY THE FED SHOULD BE ABOLISHED" (point 5)

Abolishing the FED will reduce the national debt level. By buying back the FED at $450 millions, the US Government will buy back the billions of dollars of bonds held by the FED. Thus, the net effect is a reduction in national debt. After buying back the FED, the US Government does not have to pay interest on those bonds it buys back, further reducing the national debt.

I was challenged by someone to provide primary sources to support this claim and to answer following the questions below, and I was hoping for some help from the people in this forum.

  1. Is the $450M buy back option in the above article true?
  2. How much does the Fed claim as operating expenses each year (or by what volume are they profiting)?
  3. Who has actual policy control over the Fed?
  4. Is it true that the Fed profits simply by creating deposits out of thin air and depositing them in the reserve banks, then charging interest to the US Government?

The author suggests the article can be supported by reading Congressional Records and three books: The Federal Reserve Bank by H.S. Kenan, Repeal the Federal Reserve Bank by Rev. Casimir Frank Gierut, The Secrets of the Federal Reserve by Mullins. I don't have these books, I could buy them and read them all, though I am not sure I could answer the above questions afterwards, so if anyone knows any good sources and can point to chapters or page numbers that would be really helpful.

Many thanks if any one can help me.

Marv

james_knight_chaucer's picture
james_knight_chaucer
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Posts: 160
Re: Question about US Government buying back the Federal ...

I have just looked at the article you mentioned. I reckon the guy has got a few things wrong. One that immediately struck me was he says that the FED has to pass most of its profits back to the treasury. What would be the point of charging someone interest and then handing most of it back to them? He seems to imply the FED is cooking the books, but I would have thought the government would know how much they had paid, and received back again.

TNdancer's picture
TNdancer
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Posts: 127
Re: Question about US Government buying back the Federal ...

Just so ya'll know how the world works:

The federal govt is the servant of the FED.....the govt weenies do what they are told, or end up like John Kennedy...who thought he would buck the banksters and print US Notes in competition with Federal Reserve Notes.  Fatal mistake.   Now, I'd imagine candidate "A" and candidate "B" for the seat at the White house get's this explained to them in advance of the election.....and if a serious upstart like Ross Perot shows up, they get explained to how they need to go away quietly.

Any talk of "ending the FED" or "audit the FED" is just that.....talk.  Nothing will come of it that is not agreed to in advance BY the FED, and fits their agenda.

Thomas Hedin's picture
Thomas Hedin
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Re: Question about US Government buying back the Federal ...

After talking with some friends I think the most important point is that the prior two times the central bank was abolished, they never bought back the bank they just shut it down.

Plus, why would we want to pay them anything for it.  We all know they are commiting fraud and theft by deception.

If someone stole your car would you try and by it back from them  or just take back what is rightfully yours?

Byron Dale's picture
Byron Dale
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Joined: Aug 31 2009
Posts: 40
Re: Question about US Government buying back the Federal ...

Dear Marv

 You asked these 4 questions.

  1. 1. Is the $450M buy back option in the above article true?
  2. 2. How much does the Fed claim as operating expenses each year (or by what volume are they profiting)?
  3. 3. Who has actual policy control over the Fed?
  4. 4. Is it true that the Fed profits simply by creating deposits out of thin air and depositing them in the reserve banks, then charging interest to the US Government?

To #1 the answer is no.  The Federal Reserve Act at Section 31 states: The right to amend,  alter, or repeal this Act is hereby expressly reserved.

To #2 the answer is no one out side of maybe the Federal Reserve Board would know.  There has never been independent audit.

 To #3 it is supposed to me the Broad of Directors.  But the truth is more likely to be the Rockefeller family and the J.P. Morgan bank.   

 To #4 Russell L. Munk of the Dept. of the Treasury wrote me in a personal letter and explained it this way.  “When the Fed buys government bonds, it pays for then with a check on itself. When a buyer deposits this check with his bank, (a commercial bank) the bank presents it to the Fed and receives credit for the appropriate amount in its (a commercial bank) account with the Fed (its “reserve account”) But of course a bank’s account with the Fed is its legal reserve, so once it has a new credit with the Fed it can expand its deposit by a multiple of that new credit.  Therefore, when the Fed buys bonds, the ability of the banking system to increase the money supply goes up.”

            To put this in layman’s terms When one of the 12 Federal Reserves Banks buys a bond it writes a check on an account in that Fed bank that has no money in it. When the check is sent back to that Fed bank (by a commercial bank) to get paid, the Fed bank pays, the check, by simple adding numbers into the reserve account of the Commercial bank that sent in the check.  Now, that commercial bank has more reserves so the it can make loans up to around 10 times that amount.  

authentic8's picture
authentic8
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Posts: 9
Re: Question about US Government buying back the Federal ...

Thanks for your answers, everybody.

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