Economics Questions

Re: Government and Federal Reserve Counterfeit Our Money, Right?

scineram — Thu, 25 Mar 2010 01:11:00 GMT

Re: Government and Federal Reserve Counterfeit Our Money, Right?

Gerald Spencer — Thu, 25 Mar 2010 00:42:53 GMT

As US citizens buy the foreign made products the importer/distributor/retailers send a large portion of their purchase money in US dollars to foreign businesses that manufacture the things that US citizens imported and consumed.

This causes a continuous flow of US dollars to foreign businesses in industrialized nations.

Foreign held US dollars only return to the USA to purchase (be redeemed for) title to existing items of value in the US such as real estate, instead of gold. Foreigners also purchase freshly printed US paper bonds (at less than face value or present worth at FED auctions) from our US government as they raise (borrow) US dollars to pay for the various US government operations that are in excess of tax revenues.

The US government does not really borrow US dollars from US banks to pay for its expenses that are greater than the taxes that they collect. The US congress passes laws that authorize Federal Reserve Board (via Chairman Ben Bernanke) to buy some paper and then print a bunch of new interest bearing paper currency instruments (US Bonds) in varying amounts with the promise of US government repaying these loans in US dollars at the future dates specified (when they become due).

The FED then auctions off these freshly printed US Bonds, or other Securities at US Federal Reserve Bank public auctions (AT DISCOUNTS LESS THAN CURRENT VALUE AND/OR PRESENT WORTH) to mostly foreign manufacturers, foreign banks and foreign individuals in China, India, Brazil, Pakistan, and other industrialized countries in return for the US dollars that these foreigners earned by making consumer goods for US citizens.

Re: Government and Federal Reserve Counterfeit Our Money, Right?

scineram — Sun, 21 Mar 2010 01:16:31 GMT

limitgov:

I need a the missing link that shows how the government decides when to inflate the money supply....

It doesn't. The Fed is independent.

Re: Government and Federal Reserve Counterfeit Our Money, Right?

MarcusTobin — Sat, 20 Mar 2010 22:13:12 GMT

Regarding the statement made by ClaybonB: "It should be obvious how both the government and the central bank benefit from this arrangement (government has an expanded debt ceiling and the central bank, more specifically, the commercial bank members of the central bank) earn interest on ... thin air."

That is correct.

Except, actually, the bank members of the Federal Reserve get more than just the interest on the money they print and loan. THEY ALSO GET THE PRINCIPLE !!!

Where did that original principle come from? Did they earn it by producing goods and services? NO. They put some ink on some paper. The numbers might add up to 2 trillion dollars or whatever. Costs about $5,000 to $10,000 and takes about one two weeks.

The paper with ink automatically becomes real money, and the members of the Fed automatically own it. You can't loan something if you don't own. They loan the money to the government by purchasing bonds, then they get 1) the interest on the money loaned, and, 2) on the date of maturation, they also receive the original principle in full. The Federal Reserve Act of 1913 allows these guys - and only these guys - to print money, own it, lend it, collect it, then spend it for their own pleasure. Most of them are not US citizens, don't even live in the US, and certainly don’t have the well being of the US citizen at heart. The Federal Reserve is a scam

It would be much more sensible for the US government - on rare occasions, in emergencies only (if that's possible) - to print it's own money. Then the government could spend it for whatever urgent need is at hand. Eventually the inflation caused by the extra money would b like a tax since the value everyone's dollars would be less. But at least the average citizen would not have to be taxed into the poor house in order to pay back a debt to the Fed - who never actually earned the money in the first place. The government prints the money, spends it, and it causes some inflation. But there is NO DEBT. That would be much better. THOUSANDS of times better.

Lincoln tried to do that. So did JFK. But, alas, they somehow both met with tragic deaths. Hmmmmm................

Re: Government and Federal Reserve Counterfeit Our Money, Right?

scineram — Mon, 01 Feb 2010 19:50:30 GMT

I would rather spend them myself, thanks.

Re: Government and Federal Reserve Counterfeit Our Money, Right?

protection — Sat, 30 Jan 2010 22:12:03 GMT

No, fiat means by decree. All money is money by fiat only
{fiat [let it be done, to become, be done]
1) a command or act of will that creates something without or as if without further effort
2) an authoritative determination : dictate
3) an authoritative or arbitrary order : decree}

Re: Government and Federal Reserve Counterfeit Our Money, Right?

protection — Sat, 30 Jan 2010 22:06:23 GMT

Every time the Government decides to spend money it doesn't have, it decides to inflate the money supply. The Federal Reserve lends money (a bank-book entry) to the government; the money did not exist till that moment and was just created based on the freshly issued bonds.

Re: Government and Federal Reserve Counterfeit Our Money, Right?

scineram — Sat, 30 Jan 2010 13:30:53 GMT

Fiat means it is irredeemable.

Re: Government and Federal Reserve Counterfeit Our Money, Right?

Stranger — Fri, 29 Jan 2010 21:10:53 GMT

Byzantine:

That is a distinction without a difference. If increasing the fiat money in circulation is not theft when its done by a criminal mob, then what the Fed does is not theft either. But in fact both the private and the public counterfeiter are committing theft by getting real goods and services in exchange for dollars that were just printed up, not obtained in mutual exchange.

If you say something like this you will undermine the argument against copyrights.

Re: Government and Federal Reserve Counterfeit Our Money, Right?

scineram — Fri, 29 Jan 2010 19:38:31 GMT

Fiat money is never redeemed. It is only exchanged. The new notes are as genuine as all the others so it is not counterfeiting.

Re: Government and Federal Reserve Counterfeit Our Money, Right?

nirgrahamUK — Fri, 29 Jan 2010 00:03:32 GMT

Byzantine:
It's a form of theft whether the government or a private individual does it.

no, 'it depends'. counterfeiting commodity money is obviously implicit theft. counterfeiting government fiat money is not.

my fiat currency is no better or worse than their fiat money. there is nothing backing any of it, it is a claim redeemable in nothing, so there is no implicit theft. i am not passing off any 'gold in a vault somewhere' off as 'my gold in vault'. I pass off a claim to nothing recognisable by peculiar patterns as a claim to nothing recognisable by peculiar patterns.