Question about the Federal Reserve

The purpose of income tax is control. It's used to influence what people do and to affect wealth re-distribution. It also is a puny diversion. If there were no other taxes, everyone would understand that inflation is a tax, rather than just some imponderable force of nature.

I think the Federal Reserve System is unethical because:

- It gives the banks a government sanctioned monopoly on credit creation and lending.

- It allows banks to counterfeit currency when making loans.

- The banks charge interest on the counterfeited currency (usury).

- It allows banks to loan out more currency than would otherwise be prudent, since the Federal Reserve can counterfeit currency to lend to its member banks (at discount rates) when the Fed acts as "lender of last resort".

- The entities that have first access to newly counterfeited currency (loans) -- usually banks, government, "well connected" businesses -- have an unfair purchasing power advantage, since that counterfeited currency inflates the money supply, which can cause an increase in the price of certain goods/services (theft of purchasing power).

- These inequities force many people and businesses to become dependent upon the system itself (a form of slavery).

There is a pretty good explanation of how our banking system works in "The Real Story of Money, Health, and Religion ( http://www.lulu.com/content/592768" )

That 6% maximum is a fraction of the money the member bank has invested in shares.

I believe the main goal of the Fed is not to maximize profits for itself, per se, but rather to control the currency, keep government as their ally, and keep its member banks profitable (the owners of the Federal Reserve are likely also the owners of its member banks). Below are a few relevant paragraphs from "The Real Story of Money, Health, and Religion" ( http://www.lulu.com/content/592768 ) that help explain my opinion above:

"Here’s the key point to remember. The banks with access to Federal Reserve/Central Bank funding have a continual stream of profit by skimming the difference in the Federal Reserve’s loan rate and the loan rate to their borrowers as the currency inflates. Bank owners also take no risk and are not hurt by inflation because they are not loaning their own money...

Before analyzing who gives up this flow of wealth to the banks, let’s look at the Central Banking system’s second beneficiary. Part of the genius of the Federal Reserve Act was that it didn’t simply give all benefits to the banking industry. It aided the Federal Government as well, thus assuring that the government would become dependent on the system and slow to change it.

First, the government takes “loans” directly from the Federal Reserve Central Bank but with one critical difference. The Central Bank gives back the interest “paid” on the loan. This is a convoluted way for the government to obtain perpetual zero interest loans – more correctly called free money. As if that were not enough, the US Treasury is also given the Federal Reserve’s interest charged to commercial banks on the money created out of thin air. This practice of giving the Federal Reserve’s interest to the government basically insures that all inflation on all money in existence is split as profit between both the government and the commercial banks. These benefits alone transfer a vast and well-hidden source of income to the government. A simpler way for the government to achieve exactly the same result would be for the Treasury Department to print itself free money every year. However, this method would be more straightforward and citizens would intuitively realize that the resultant inflation robbed them of their savings and earning power. Secondly, this method of printing free government income would not allow commercial banks to also skim their percentage of the inflating money supply.

The government’s free benefits don’t end there, however. Next, as the currency inflates, the government’s zero interest debt obligation is gradually erased. This debt is continually rolled over and eventually inflates away to nothing.

Lastly, the government gains enormously in one more hidden way. Taxes on the public's savings are based on the imaginary “gain” from inflation. If a person owned a home or gold under a stable currency, the value would remain relatively constant. Under an inflating currency, however, the government is able to tax the “gain” on savings as their cost in dollars rises every year. Basically this amounts to a well-hidden tax on only those Americans who save money. The more you save, the more you are taxed. Is it any wonder our savings rate is now negative and the general population looks to the government rather than savings in difficult times?"

So actually the U.S. can loan money to itself, not at the going rate of interest, but basically at 6% of the going rate of interest.

So the U.S. is happy - they can get money for free, basically, and the Fed is happy. Say the interest is 5%. Well, 5 x 0.06 is only 0.3%.

So 0.3% is not a high rate of return, but it's on billions and billions of dollars, for basically no work.

What a great scam!