What's in it for the Fed?

[Imsnappytom]

I have never totally understood exactly how the Fed benefits from its position as the central bank. My understanding is that basically the Fed creates and loans money to institutions, and ultimately the Fed gets the money paid back plus interest. Is that the basic motive for the Fed, i.e. the fact that they earn profits on loans? If that is the case, it raises a number of other questions but for the sake of brevity, can someone explain to me (or point me to an explanation for) what exactly the Fed wants?

Thanks.

[chloe732]

The Fed is a private banking cartel, and I do not believe that statement is merely a matter of opinion or ideology. It is a statement of fact.

What do cartels want? They want barriers to entry. They want to limit competition, keep prices high for cartel members. (Note: the “prices” I refer to, in regard to banking, are not high interest rates. Rather, it is the availability of “money to lend”, instant liquidity injected into the system, and bailouts.)

The Fed performs this function marvelously. How? It’s protector, the Federal Government, has the guns and firepower to make sure the cartel’s rules are obeyed. If you don’t believe me, try using gold as money. The IRS will like to talk to you because you just sold a capital asset by exchanging your gold coin for something (capital gain), and that’s just one small example. There are numerous, more significant, examples of government protection.

The Federal Government provides this protection, and monopoly power on money creation, because the cartel buys Government debt with money the central bank prints. The Government spends this money on boondoggle projects, which pleases voters, who reelect the folks who spent the money.

Thus, everyone benefits: The commercial banks benefit because they can coordinate their fractional reserve banking and expand together, pyramiding on top of money created from thin air by the central bank; the Fed (cartel) benefits from maintaining its cartel status; the Government benefits by having a ready buyer of its debt, so it can spend without the political repercussions of tax increases and high bond yields.

As you can see, many people benefit from this arrangement, except savers and ordinary people who lose their jobs when the malinvestment is exposed after the boom.

What Has Government Done to Our Money

The Creature from Jekyll Island (I do not agree with everything here, but it is a good primer regarding the power and motivation of the Fed)

[ClaytonB]

You misunderstand what the Fed is. As the previous poster pointed out, the Fed is just the headquarters of the banking cartel. It is not acting to benefit itself, it is acting to benefit all its members, that is, the member banks which comprise the Fed. The primary benefit is to exclude all new competitors. Secondary benefits include driving up demand for credit and other banking services, market manipulation and fractional-reserve money multiplication. The Fed can send all its “profits” back to the Treasury exactly because all the important benefits are already being reaped by the individual member banks as a side-effect of the Fed’s authority, operations and influence on government policy. That should give you an idea of just how massive the plundering is… the billions of dollars of interest that the Fed “donates” back to the Treasury are mere pocket change.

Clayton -