Does the federal reserve make money?
A recent post talked about how we are actually having deflation currently. It has been a while since I read about the private federal reserve system so please correct me if I remember this wrong (or if I read a false source).
The federal reserve loans money out to commercial banks and then it collects on these debts with interest. The money that comes back in (could be only the interest or profit) is paid out to the private bank who own shares of the federal reserve. The interest rate was 6% if I read correctly. If this is the case deflation has a harder time occuring because the money is still in circulation and not destroyed.
Another aspect is the debt to the federal reserve being greater than the money in circulation. This would only be possible if they destroy the money that comes back in and not pay it out to the private banks who own the shares.
I hope this all makes sense.
Your hope is dashed on the rocks. :-)
The Federal Reserve System is not "private." It comprises two government agencies, (the Board of Governors and the Federal Open Market Committee), and a dozen Federal Reserve banks. The banks have boards of directors, but they are overseen by the Board of Governors. The Fed is a government problem, which means it's a big problem.
The oft-repeated assertion that the banks are "private" may be due to the fact that private "member banks" must contribute capital, upon which they are paid a maximum return of 6% per annum. Note well that the 6% is paid on the member banks' capital contributions. It is not a fraction of the Fed's profit. New rule: The Fed is now paying interest on reserves that the member banks have on deposit.
I do not know what interest rate the Fed currently charges member banks that borrow from the "discount window," but is is higher than the Federal Funds rate, which is the rate that the Fed tries to force banks to charge each other for overnight loans, currently 0.25%! However, most of the lending is being done through TARP and similar facilities, to allow the borrowers to remain secret. TARP interest rates were around 8% last I heard.
Principle that the Fed recovers goes into the incinerator, or more accurately, the bit-bucket. Interest income left over after paying the member banks their 6% of the capital they have invested goes to the US Treasury, nominally as an "franchise tax." It's called that to get around the rule that the Fed must retain its profits to (keep the dollar strong).
It's been a while
But wasn't it discovered back during Reagan that over 90% of what we pay in Fed Income Tax go to the FED for interest and fees?
"We are the inheritors of the American Enlightenment, which tells us that Individual Liberty always trumps collectivism in all forms."
www.libertyrestorationproject.org
"We are the inheritors of the American Enlightenment, which tells us that Individual Liberty always trumps collectivism in all forms."
Of course they do
It costs them $200 to print up $10,000 worth of bills. Then they charge interest on that.
Of course they make money. They charge interest on loans.
A lot of the TARP money was lent to foreign central banks with interest. { Congressman Grayson's questioning of Timmy boy.}
H.R. 1207 is designed to show who got what, and is what the Fed doing legal, if taxpayer money is loaned to other countries without congressional approval, is that legal?
beesting
It's ALL about the debt
THAT is the Fed's job... to aggregate ALL of the debt of America into a nice little pile of titles and deeds and treasury notes, then collapse into the arms of the World Bank. They (unlike most of us) realize their paper is worthless... they're scamming us for the ownership of the REAL underlying asset. It's a con game.
The FRN's are utterly worthless- THEY know it. But we're still trading REAL assets and REAL labor for their worthless paper as if it had some actual value.
Debt backed-up against worthless legal tender is the ultimate scam. A Jersey Boardwalk hustler woudn't try this... he'd never believe anyone would be that stupid.