How Does the Federal Reserve Create Money?

A few weeks ago, I solicited FEE daily readers for their questions about economics. Pretty quickly I got a question I was pretty certain I’d get eventually. It comes from a man named Warren from Chicago who asks:

“what are the levers used by the Federal Reserve Bank to increase or decrease the money supply?

I know it has something to do with interest rates and bank reserves, but how does it actually take place and who receives all the extra money in circulation to cause the inflation?”

There are several channels that the Federal Reserve can use to create money, but I’m going to focus on the two most relevant ones: open market operations and interest on reserves.

'Printing' Money

The first way the Federal Reserve can increase the money supply is by creating more dollars. It’s not as simple as them printing dollar bills then throwing them out of a helicopter, though.

Instead, when the Federal Reserve wants to create money and put it into the system, it does so through banks. Banks hold several types of assets including treasury bonds. Treasury bonds are IOUs that the government issues in exchange for a loan. You buy a bond with cash today and the government promises to pay you back with interest in the future.

Banks like to hold treasury bonds because they’re viewed as low risk—it’s unlikely the US government will default on debt (any time soon at least). Treasury bonds also have the advantage that they’re relatively easy to sell to someone else to get cash. Economists call this ease of converting an asset into money liquidity.

The Federal Reserve offers to buy these bonds from banks. When the Federal Reserve buys bonds, they have an advantage you and I don’t. They are allowed to print new money to buy the bonds. It’s more likely that the money will be digitally created than literally printed, but the form of the money doesn’t make a difference.

The Federal Reserve acquires government bonds and banks acquire newly created money. The process doesn’t stop there, however. Banks don’t generally like to sit on large piles of money because money doesn’t earn interest (unlike the bonds they just sold to the central bank). So what do banks do with their money?

One thing they can do is make more loans to businesses. The increased supply of funds available to lend out means that there will be more loans available for the same number of businesses. Everything else held constant, this means the price of borrowing (the interest rate) will fall.

Banks can also turn around and buy more treasury bonds if they want to replace some of the bonds sold. This higher bond demand means the government will be able to take on more debt to finance its spending.

Economists call this process of the Federal Reserve using newly created money to buy bonds from private banks an open market purchase.

So how much has the Federal Reserve utilized this tool as of late? Look at this graph:

Figure 1: Treasury Securities Balances Held Outright

Since January 2020, The Federal Reserve has increased its treasury securities from $2.3 trillion to around $5.6 trillion today, an increase of around $3.3 trillion.

The Fed Moves into Housing

A more recent move by the Federal Reserve has been to purchase other types of assets as well. Before 2008, the Federal Reserve owned $0 in Mortgage-Backed Securities (MBSs). Today is a different story.

I won’t go into detail about MBSs (you can read more about them here) except to say they’re another type of financial asset banks hold which are a good bit riskier than treasury bonds. Here is a graph showing how Federal Reserve MBS holdings exploded in 2008 (in an attempt to alleviate the housing crisis) and again in 2020 (in an attempt to curb the negative effects of COVID policies).

Figure 2: Mortgage Backed Securities Held Outright

As you can see, the Federal Reserve acquired around $1.3 trillion worth of mortgage backed securities from January 2020 to today.

As economist Jim Gwartney pointed out for AIER,

“[the] $4.2 trillion increase in federal spending over the two [COVID] years was financed entirely by borrowing from the Fed. Fed holdings of financial assets, mostly Treasury bonds and mortgage-backed securities of federal housing authorities, increased from $4.2 trillion in February 2020 to $8.8 trillion in December 2021.”

So now we understand how the Federal Reserve creates new money, and who it goes to. Banks are the first recipient, and borrowers or those who sell financial assets banks demand (including the government itself) are the second recipients. And as Warren alluded in his question, this policy indirectly influences the interest rate.

Interest on Reserves

There’s one other important tool for how the Federal Reserve can influence the creation of money. It’s a relatively new policy lever called interest on reserve balances (IORB).

To understand how the Federal Reserve impacts the money supply through IORB, you need to have a basic understanding of our banking system.

Let’s say Warren deposits $1,000 in his bank, FEEbank. What happens to the money then? In the United States, it’s unlikely that the money will sit in a vault. Instead, FEEbank will likely try to make a return on that money by lending some of it out to someone else.

So let’s say Jim comes and asks for a loan of $800 from FEEbank. FEEbank lends out $800 of Warren’s $1000. So how much money does Warren have? Well, when the bank lends out your money, your balance doesn’t go down. Warren can still go withdraw his money so long as the bank can give him deposits they’ve kept from other customers.

If everyone came to get their money at once, the bank would run out of money, but so long as that doesn’t happen, FEEbank doesn’t have a problem.

So now Warren has $1,000 and Jim has $800. There is now $1,800 in the economy compared to $1,000 before. FEEbank created more money!

The process doesn’t even have to end there. Jim can deposit the $800 in another bank, which can lend out a portion to someone else.

This system of banking is called fractional reserve banking because banks only keep a fraction of your deposits as reserves, and they loan out the rest.

So private banks in this system can create money by lending deposits, but what does this have to do with the Federal Reserve?

In 2008, the Federal Reserve adopted a policy of paying banks interest for the money they kept in reserves. So, instead of FEEbank loaning out Warren’s money, the Federal Reserve could offer to pay FEEbank to keep the money in the vault.

The higher the interest the Federal Reserve offers to pay FEEBank, the less likely it is to lend out the money. Why make a risky loan at a 3.5% interest rate if the Federal Reserve will pay you 3.5% for keeping it in the vault? The Federal Reserve is essentially paying banks to not make loans.

Notice, too, this also allows the Federal Reserve to more directly control the interest rate. If the Federal Reserve wants loans to have a 4% interest rate, all the agency has to do is promise to pay 3.9% IORB to not make the loan. In that case, a private borrower would have to offer at least 4% to beat the Federal Reserve.

So if the Federal Reserve wants banks to lend more of their deposits thereby creating more money, all they need to do is lower the IORB. And that’s exactly what they did during COVID.

In January 2020, the interest rate on reserves was 1.55%. By mid-March 2020, the Federal Reserve had dropped the rate to 0.1%.

This policy made it relatively more lucrative for banks to increase lending and, everything else held constant, when the benefits of an action goes up, people will do more of that action.

The result of these policies has been a large increase in the supply of money. Economists measure what counts as money a few different ways, but one of the most commonly used and accepted measures is called M2.

From January 2020 to January 2022, the M2 money supply increased from $15.4 trillion to $21.6 trillion.

That’s a 40% increase in the money supply— unprecedented in recent US history.

Figure 3: M2 Money Supply

More Money, More Problems

As I’ve explained since May of last year, this increase in money supply inevitably led to higher prices across the board (aka inflation). FEE’s Dan Sanchez has explained this in depth as well.

Unfortunately, the Federal Reserve seems to have printed itself into a corner.

Utilizing open market purchases and lowering IORB may have propped up the economy by stimulating lending and investment in 2020, but the chickens are coming to roost. At this point, if the Federal Reserve wants to use its levers to bring inflation down, it’s going to do so by hurting investment opportunities.

As of this month, the IORB has been raised to 3.15%. This means less funds will be available to borrowers. Whether we’re in a technical recession or not right now, it seems unlikely to me the Federal Reserve will be able to bring inflation down without allowing an economic correction to take place.

There’s no such thing as a free lunch. Printing dollars does not mean there are more sandwiches to go around. And although the Federal Reserve can affect the economy with their levers, they cannot print prosperity.

Peter Jacobsen

Peter Jacobsen teaches economics and holds the position of Gwartney Professor of Economics. He received his graduate education at George Mason University.

This article was originally published on FEE.org. Read the original article.

How Does the Federal Reserve Create Money?

The Federal Reserve is Embracing Left-Wing Policies—Here’s Why You Shouldn’t Be Surprised

The Federal Reserve System has come under fire in the last few months for extending itself into areas outside its Congressional “dual mandate” of stabilizing prices and maximizing employment. There are two areas where the Fed is being accused of overreaching.

The first area is economic equality. For example, the Federal Reserve Bank of New York website greets visitors with a message stating, “we are firm in the belief that economic equality is a critical component for social justice.” Senator Pat Toomey recently sent letters to several Regional Federal Reserve Banks criticizing this policy pursuit of economic equality as, “wholly unrelated to the Federal Reserve’s statutory mandate.”

The second area, environmental policy, has also become a more central focus. Economist Alex Salter reports that the Fed recently created two climate committees and joined a group dedicated to making the financial system more environmentally focused. And, although Chairman Jerome Powell says the Fed isn’t trying to set climate policy, a report out of Reuters alleges that the Fed has begun to pressure banks to assess climate risk.

As a result of this public shift, Salter has published an open letter with 42 distinguished co-signatories expressing concern. The letter’s author and co-signers are bothered by the Fed’s mission creep, and call for the Fed to focus on monetary policy and money, rather than activism.

The Fed’s Political Dependence

While this concern is well-placed, it’s important to note that the Fed abandoning political independence is nothing new. The Fed has a long history of breaching its political independence “norms.”

Perhaps the most famous example of this was when then-President Richard Nixon pressured Fed Chairman Arthur Burns into crafting monetary policy in a way that would help his re-election. A recorded conversation between the two has Nixon laughing about the idea of political independence:

“‘I know there’s the myth of the autonomous Fed . . .” Nixon barked a quick laugh. “...and when you go up for confirmation some Senator may ask you about your friendship with the President. Appearances are going to be important, so you can call Ehrlichman to get messages to me, and he’ll call you.’”

However, the Fed hasn’t only been beholden to politicians—special interest groups also appear to have power over the Fed. After the 2008 financial crisis, a new wave of bank regulators was sent to deal with large financial institutions such as JPMorgan and Goldman Sachs. One regulator sent by the New York Fed, Carmen Segarra, released recorded conversations between herself, her supervisors at the New York Fed, and officials at Goldman Sachs.

In the conversations, Segarra is urged by her supervisors at the Fed to change her report suggesting Goldman Sachs had an insufficient policy for dealing with conflicts of interest. When she refused, Segarra was fired by the Fed.

Although being urged to change her report may be the most egregious example, the common theme in the tapes is clear: the Fed regulators seem more like partners of Goldman Sachs than watchdogs.

The takeaway is clear. The Fed has a storied history of political corruption, and this shouldn’t be surprising.

Buying Fed Policy

To understand why we should expect corruption from the Fed we need to consider the lessons of Public Choice economics.

Public Choice looks at politics as an exchange. Bureaucrats, politicians, and political appointees, for example, want things like good jobs after retirement, funding for political projects, and valuable relationships with powerful people. In order to obtain these things, these political actors may be willing to craft policies to benefit special interest groups or other politicians.

Consider, for example, the Fed. One of the powers the Fed has is the ability to print new money. When a new 100 dollar bill is printed, the first person to receive the new money will be able to use it to buy real goods and services. If they buy a TV, for example, the new 100 dollar bill goes to the person who sold the TV. However, as the new dollar bill is spent more and more, the increased demand it creates leads to higher prices, everything else held constant.

So while the first people to get the new money get a good deal, it leads to higher prices for everyone else. Inflation is like a hidden tax on whoever gets new money after the prices have risen. Receiving new money first, then, is a privilege that some may be willing to pay for. If it only costs you $90 to lobby the Fed for a new 100 dollar bill, you come out $10 richer.

Printing money isn’t only beneficial for those who receive the money first, though. As the example of president Nixon highlighted, politicians focused on short-term re-election goals may be interested in giving favors, privileges, or punishments to members of the Fed in order to improve the economy before an election.

Finally, the Fed’s regulatory role in banks is another “asset” special interests would like to purchase. The Segarra tapes show a clear example of how powerful special interest groups can use their influence to control the regulations within their industry. Economists call this “regulatory capture.”

So, although I ultimately agree with Salter’s open letter, it’s important to recognize that what’s happening isn’t very new. The Fed has long been involved in pursuing goals other than monetary stability. The only new development is the mask is dropping. The Fed is now being more transparent about its other activities.

And while I’d like to believe we can reign in the Fed and convince its members to follow rules, I’m not so sure. The Fed, as an institution, has the ability to transfer enormous amounts of wealth from some groups to others in the form of inflation and regulation. Given the enormity of these transfers, it seems unlikely that self-interested politicians will be willing to give up that power any time soon.

Peter Jacobsen

Peter Jacobsen is an Assistant Professor of Economics at Ottawa University and the Gwartney Professor of Economic Education and Research at the Gwartney Institute. He received his PhD in economics from George Mason University, and obtained his BS from Southeast Missouri State University. His research interest is at the intersection of political economy, development economics, and population economics. 

This article was originally published on FEE.org. Read the original article.

The Federal Reserve is Embracing Left-Wing Policies—Here’s Why You Shouldn’t Be Surprised

Sen. Rand Paul: The Fed Is Crippling America

Sen. Rand Paul: The Fed Is Crippling America


On Jan. 12, Congress is scheduled to vote on the “Audit the Fed” legislation (H.R. 24/S. 264), which, if passed, would bring to an end to the Federal Reserve’s unchecked—and even arguably unconstitutional—power in the financial markets and the economy.

We aren’t the first to be wary of the powers of central banks. Founding Father Thomas Jefferson viewed the powers of central banks as being contrary to the protections of the Constitution. As Jefferson wrote: “I sincerely believe that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”

In a similar vein, the great Austrian economist Ludwig von Mises also recognized that limiting government power in the realm of money was a matter of liberty, not merely economics. Mises explained that “the idea of sound money … was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.”

How far we have come as a country that these words from Jefferson and Mises sound so foreign today. Perhaps we have all been blinded by the credit and equity bubbles that surround us. But what better wake-up call to rally support for legislation that would shine a bright light on the government institution that today has created these bubbles, subsidizes small subsets of the population (thus amplifying wealth inequality), and enables endless government debt?

The Fed was intended to be an apolitical body, a concession to placate the naysayers. But today, the Fed isn’t even shy about entering the political fray: witness Federal Reserve Chair Janet Yellen’s income inequality speech riddled with Democratic talking points during the 2014 elections.

The Fed is, indeed, a political, oligarchic force, and a key part of what looks and functions like a banking cartel. During the 2007-08 financial crisis, the Fed’s true nature was clear to anyone paying attention. As the Treasury began bailing out the investment banks from the consequences of their profligate risk-taking (and in some cases fraudulent schemes), the Fed moved in tandem, further purchasing the underwater assets of these institutions, as well as actually paying interest to the commercial banks (hemorrhaging from risky loans) for reserves they kept parked at the Fed.

To be sure, Fed officials came up with opaque jargon to describe such operations, but the stark reality is that the Fed was treating risky assets as good collateral, and in the fall of 2008 began literally paying banks to not make loans to their customers.

Even today, the recent policy announcement has doubled the rate of this massive implicit taxpayer subsidy to the banks—what they call “interest on reserves.” In the textbook rate-hike case, the Fed sells off assets (or slows the rate of purchases) in order to reduce the supply of reserves. Then, the equilibrium price of borrowing reserves (i.e., fed funds rate) rises. In contrast, now and for the foreseeable future, as indicated by the Fed’s guidance statements, the Fed is raising rates by increasing interest on reserves.

As of Dec. 17, the Fed is paying 50 basis points on both required and excess reserves. So the Fed, itself, is increasing how much it will pay to “borrow” reserves from the commercial banks. Given the estimated $2.6 trillion in excess reserves, at 50 basis points that means the Fed will be paying commercial banks some $13 billion in annual income. Right now, the Fed is paying the same on required and excess reserves, though that in principle could differ.

As the Fed keeps raising interest rates through this same mechanism, the amount paid to commercial banks will only mushroom. You can forgive analysts for not discussing this; it was not even mentioned in the Fed’s Dec. 16 announcement.

As the Fed pays commercial bankers more in interest payments, there is dollar-for-dollar less for the Treasury; in other words, for a given level of federal expenditures, the deficit is that much higher. Therefore, the U.S. taxpayer is subsidizing commercial banks to not make loans to their customers—or rather bribing them to charge their customers higher interest rates on loans. And, the U.S. taxpayer is going deeper into debt to provide this bank subsidy.

RAND PAUL: Here’s why we should audit the Fed

RAND PAUL: Here’s why we should audit the Fed


It is no secret that the Federal Reserve’s unchecked printing press causes recessions and increases income inequality. Allowing the Fed to inflate our money supply will artificially keep interests rates low, but at what cost? Their acts can no longer go unchecked, which is why I am proud to carry forth my father’s original ‘Audit the Fed’ legislation, which will receive a vote in the Senate in early January.

In 2009, Senator Cruz drafted a legal brief praising President Obama’s American Recovery and Reinvestment Act, a stimulus bill that increased deficit spending by over $800 billion. In the brief, Senator Cruz argued that the bill’s handouts will “directly impact the economy” and “further the greater purpose of economic recovery for America,”

Earlier this month, Cruz then blamed the Great Recession not on the Federal Reserve’s artificial lowering of interest rates, but on its failure to continue pushing them down in a timely manner. Cruz said that the Federal Reserve’s decision to “[shift] to a tighter monetary policy…set the stage for the financial crisis.”

On the campaign trail, Senator Cruz has further demonstrated his unwillingness to rein in artificial credit expansion by repeatedly calling for the Fed to follow “rules-based” monetary policy. This means that he still wants to control the money supply in order to meet the requirements of a mandate or equation.

I couldn’t disagree more strongly. No true fiscal conservative should ever support the artificial lowering of interest rates—not in 2008, not now, not ever. Doing so is the equivalent of signing a death warrant for our country’s low income earners.

Former Federal Reserve Governor Kevin Warsh refers to the Fed’s easy-money policies as the reverse Robin Hood effect. “If you have access to credit—if you’ve got a big balance sheet—the Fed has made you richer,” he said in an interview. “This is a way to make the well-to-do even more well-to-do.”

Yellen urges Congress to be wary of Fed reforms

Yellen urges Congress to be wary of Fed reforms


Federal Reserve Chairwoman Janet Yellen urged lawmakers to tread lightly when it comes to overhauling the central bank, warning that proposed changes could undermine its ability to support the economy.

In prepared testimony, Yellen will tout the Fed’s own efforts to boost its transparency as a way to discourage lawmakers from pushing their own proposals to bring the Fed under stricter oversight.

“Efforts to further increase transparency, no matter how well intentioned, must avoid unintended consequences that could undermine the Federal Reserve’s ability to make policy in the long-run best interest of American families and businesses,” she said.

Yellen’s testimony Wednesday before the House Financial Services Committee will come one day after that panel held a hearing in which Republicans blasted the Fed as being unaccountable.

While Yellen will argue in her testimony that Fed tweaks could subject the central bank to political pressure and make it less effective, GOP lawmakers have argued the Fed holds up its political independence as a way to avoid scrutiny.

“The Fed’s clamor for independence is its underpinning for circumventing any sort of congressional accountability,” said Rep. Sean Duffy (R-Wis.) on Tuesday.

The relationship between the Fed and Republicans has been touchy ever since the Fed embarked on an unprecedented run of monetary stimulus following the recession. But the dynamic took a turn for the worse recently, as the Fed has refused to comply with demands for documents lawmakers seek in conjunction with a probe into a 2012 leak of sensitive Fed information.

The Financial Services panel went so far as to issue subpoenas for some documents, at which point the Fed refused to provide them, citing an ongoing criminal probe into the matter by the Department of Justice.

Lawmakers have pushed a number of ideas to overhaul the Fed, from reworking its structure, requiring additional top-ranking Fed spots to be confirmed by the Senate or even requiring the Fed to set monetary policy based on an explicit rule.

Senator Bob Corker Wants To Stop Audit the Fed

Senator Bob Corker Wants To Stop Audit the Fed


Senator Bob Corker (R-Tenn.) could be one of the biggest obstacles to passing audit the Fed in the Senate. As a member of the Senate Committee on Banking, Housing, and Urban Affairs, Senator Corker has been an outspoken opponent of the Federal Reserve Transparency Act.

Corker recently said: “People say this, audit the Fed, and I don’t think they really realize the Fed is audited and what this is really about is Congress getting involved in monetary policy.”

However, that’s not the case.

The Federal Reserve is not fully audited. The audits that Corker is referring to are very limited in scope and not enough. Auditors at the Government Accountability Office (GAO) are only allowed to look at the Fed’s financial statements—not the Fed’s monetary policy operations.

According to Campaign for Liberty, auditors are prohibited from law from looking at:

transactions conducted on behalf of or with foreign central banks, foreign governments, and nonprivate international financing organizations

deliberations, decisions, and actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations

transactions made under the direction of the Federal Open Market Committee including transactions of the Federal Reserve System Open Market Account; and

those portions of oral, written, telegraphic, or telephonic discussions and communications among or between Members of the Board of Governors, and officers and employees of the Federal Reserve System which deal with topics listed in subparagraphs

That means that the most important decisions at the Fed that affect the American people are decided behind closed doors.

It’s also disingenuous to say that this is really about Congress getting involved in monetary policy. The Federal Reserve Transparency Act would merely eliminate the current audit restrictions placed on the Government Accountability Office (GAO) and require a full and thorough audit of the Federal Reserve.

The Federal Reserve Runs the Economy, Not Congress or the President

The Federal Reserve Runs the Economy, Not Congress or the President


Janet Yellen told the markets what they wanted to hear today and the indexes rocketed out of negative territory to finish up over 1 %. As usual, speculation abounds on precisely what was in the minds of investors.

Journalists tend to overstate the causal importance of breaking news when the market makes big moves. Often, those moves were predicted months in advance by serious traders and what happened that day had little to do with what the market did. Not true for the Fed’s announcements. They do move the markets immediately.

What most people don’t know, or at least don’t acknowledge, is that the Federal Reserve really runs the entire economy. When the Fed inflates the supply of money and credit, indexes go up, growth occurs and the economy “improves.” When it deflates the supply of money and credit, indexes go down, contraction occurs and the economy “slows.”

That’s really the whole story of the American economy. Think about that for a moment.

It doesn’t matter who is president, which party controls Congress or what any of those people do or don’t do. Yes, regulations and tax rates have some effect on the economy. Liberals might say more regulation is a good thing, conservatives might say it is bad.

But taxes and regulations haven’t really had much effect at all in the past 40 years. Before that, when taxes were at 90%, they mattered, but not when the top rate fluctuates between 35% and 39%. Do the math. It’s not that significant.

Regulations haven’t changed that much since the New Deal, either. Yes, there was some mild “deregulation” and subsequent “re-regulation.” They caused little bumps and bounces, but nothing compared to the wild swings caused by monetary policy.

In reality, what elected officials have done since 1971, when the U.S. dollar became a completely fiat currency, has had about as much effect on the economy as turning on a blow dryer in a hurricane. Point it with the wind and it makes the wind blow infinitesimally faster. Point it against the wind and it makes the wind blow infinitesimally slower. Either way, the difference is negligible.

Once you understand this, most political narratives about the economy become fairy tales. Liberals credit Bill Clinton with “managing the economy” well during the boom years of the 1990’s. Conservatives say it was that Republican Congress.

Neither Clinton and nor Congress had anything to do with it. They were the blow dryers. The 90’s economy was really just a tech bubble blown up by the Fed with inflation that burst in 2000 when the Fed tightened. Clinton and the Republican Congress were both in office for the whole time. Neither did anything significant to cause the boom or the bust. It was all the Fed.

No one really disputes the Fed’s role. American voters just don’t draw the obvious conclusions. They continue to talk about presidents or Congress as if they significantly affect the economy, when in reality they don’t. At least they don’t anymore.

This couldn’t have been truer than for George W. Bush, who did almost nothing that affected the economy, other than sign Sarbanes-Oxley. Yet, Bush gets credit from Republicans for a “Bush Boom” and blame from Democrats for the housing meltdown.

Those, too, were all the Fed. The Fed blew up the housing bubble with monetary inflation in an attempt to stimulate recovery after its tech bubble burst. It popped the housing bubble it created when it tightened. That’s what caused the Bush Boom and the Bush Bust. Bush himself was just along for the ride.

Now, we have market indexes at an all-time high and an economy that has supposedly “recovered.” As usual, the president takes credit for all of this. If the crash comes on his watch, he’ll take all of the blame. But, like Bush, Obama is just along for the ride. There really is no cause/effect relationship between anything he’s done and what we’re seeing in the Dow or S&P 500 indexes.

We’re we’re really seeing are the results of unprecedented monetary inflation by the Fed, holding interest rates at an unprecedented low (near zero) for an unprecedented period of time (over six years).

The Sane Case for Auditing the Fed

The Sane Case for Auditing the Fed


The Federal Reserve, which was just caught paying footsie with Goldman Sachs, is as shadowy as it is powerful. So why can’t Congress bring itself to actually audit the damn thing?

If you want to get a sense of just how incredibly powerful the Federal Reserve really is, forget about interest rates, reserve requirements, or even the ways in which a random nose-pick or burp by Janet Yellin during lunch at a Jackson Hole delicatessen might send markets soaring or crashing.

Instead, think about this: In an age utterly bereft of bipartisanship, auditing the nation’s central bank is one of the few issues on which Rand Paul and Elizabeth Warren agree. So does everyone else. Polls consistently show anywhere between 70 percent and 80 percent of Americans supporting an audit that would not just open the Fed’s ledger books but peer into exactly how monetary policy gets set.

Just a couple of weeks ago, the House of Representatives passed The Federal Reserve Transparency Act by an overwhelming vote of 333-92; a majority of House Democrats voted for an audit while just one Republican voted against the bill.

Yet despite overwhelming public and congressional support for an audit, it’s just not going to happen.

What is it about the Fed that inspires such solidarity among its critics? Ever since its creation during the Woodrow Wilson era, it’s been a favorite target of everyone from right-wing conspiracists who fear the Fed is simply another cog in an international Jewish banking conspiracy to left-wing populists who see it as both a cause and effect of globalized capital. Because it controls the money supply of the planet’s biggest economy and because it operates so opaquely, it’s an obvious place to project all sorts of anxieties about large, impersonal forces beyond our reach that sharply affect, if not actually control, virtually all aspects of our daily lives.

But one needn’t wade into the fever swamps of conspiracy to see the Fed as an inherently problematic institution. The central bank is explicitly tasked with the fundamentally incompatible duties of conducting stable monetary policy, promoting full employment, acting as a lender of last resort, and regulating the banks it works with. Good luck with all that. Also, while it’s technically independent, the federal government exerts massive political pressure on the Fed and appoints its chair and board of governors.

House approves Ron Paul’s ‘Audit the Fed’ bill

House approves Ron Paul’s ‘Audit the Fed’ bill


Former Rep. Ron Paul’s push to audit the Federal Reserve got another boost Wednesday when the House passed the bill for the second time in three years, and by a bigger margin than before.


The bill, now sponsored by Rep. Paul Broun, Georgia Republican, was approved on a 333-92 vote, with all but one Republican and 106 Democrats in favor of it. That’s a major jump from last time, when a majority of Democrats voted against it.


Still, despite the overwhelming support, the law is likely to die. Senate Majority Leader Harry Reid, who had previously indicated support for such an audit, reversed himself in 2012 and said he wouldn’t let the bill come to to the Senate floor.

End The Fed by Ron Paul

In the post-meltdown world, it is irresponsible, ineffective, and ultimately useless to have a serious economic debate without considering and challenging the role of the Federal Reserve.

Most people think of the Fed as an indispensable institution without which the country's economy could not properly function. But in END THE FED, Ron Paul draws on American history, economics, and fascinating stories from his own long political life to argue that the Fed is both corrupt and unconstitutional. It is inflating currency today at nearly a Weimar or Zimbabwe level, a practice that threatens to put us into an inflationary depression where $100 bills are worthless. What most people don't realize is that the Fed -- created by the Morgans and Rockefellers at a private club off the coast of Georgia -- is actually working against their own personal interests. Congressman Paul's urgent appeal to all citizens and officials tells us where we went wrong and what we need to do fix America's economic policy for future generations.

Price Index for Meats, Poultry, Fish & Eggs Rockets to All-Time High

Price Index for Meats, Poultry, Fish & Eggs Rockets to All-Time High

The seasonally-adjusted price index for meats, poultry, fish, and eggs hit an all-time high in May, according to data from the Bureau of Labor Statistics (BLS).

In January 1967, when the BLS started tracking this measure, the index for meats, poultry, fish, and eggs was 38.1. As of last May, it was 234.572. By this January, it hit 240.006. By April, it hit 249.362. And, in May, it climbed to a record 252.832.

“The index for meats, poultry, fish and eggs has risen 7.7 percent over the span [last year],” says the BLS.

“The index for food at home increased 0.7 percent, its largest increase since July 2011. Five of the six major grocery store food group indexes increased in May. The index for meats, poultry, fish, and eggs rose 1.4 percent in May after a 1.5 increase in April, with virtually all its major components increasing,” BLS states.

GOP Senate Leader McConnell seeking to get a vote on Audit the Fed

This morning, Republican Senate Leader Mitch McConnell told Louisville, Kentucky, radio talk-show host Mandy Connell that he was working with fellow Kentucky Senator Rand Paul to find a way around Harry Reid’s obstructionism and force the Senate to vote on Ron Paul’s Audit the Fed Bill (S. 209).

via megalextoria.com

Federal Reserve was blind to crisis in 2007

Federal Reserve officials were largely unaware of the financial crisis brewing in 2007, until they found themselves in the middle of it, transcripts released Friday show.

via megalextoria.com

Bernanke Wields New Tools to Reduce Unemployment Rate

Bernanke is pulling out all the stops to kick this economy back into a higher gear,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “They are buying everything in sight — Treasuries, mortgage-backed securities — and will keep rates low until everyone who wants a job has one.

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Bernanke Warns Congress: Don’t Change Law To Review Fed’s Policy Discussions

The chairman cautioned Congress against adopting a law that would allow it to review the Fed’s interest-rate policy discussions. The House has passed legislation to broaden Congress’ investigative authority over the Fed and allow a review of its interest-rate policymaking. The Senate hasn’t adopted the bill.

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If you have not yet done so, call or write your senator and urge them to support S 202 "The Federal Reserve Transparency Act" and sign the petition at http://www.auditthefed.com/

How QE3 Will Make The Wealthy Even Wealthier While Causing Living Standards To Fall For The Rest Of Us

The money for QE3 is being created out of thin air and this round of quantitative easing is going to be “open-ended” which means that the Federal Reserve is going to keep doing it for as long as they feel like it. But is this really good for the average American on the street? No way.

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Because this is open ended, it's more like QE infinity... Yay!

Ron Paul’s victory over Bernanke and the Federal Reserve

The financial catastrophe of 2008 has made the public increasingly mistrustful of the Fed and its covert activities. A poll conducted in 2010 showed that the majority of Americans believed that the Fed should be severely reigned in or abolished. In a separate survey conducted by Rasmussen in 2010, 80 percent of Americans believed that the Fed should be thoroughly audited. As a result of its own actions, the Fed is now hotly debated in print, television, and in our public square.

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Ron Paul has just been right so damn much of the time. From his predictions of the housing bubble and collapse, to his predictions on what we would do in the middle east and how it turned out, to his observations of the Federal Reserve. You would think he would get a little more respect.

Tell the Senate: Audit the Federal Reserve, Pass S. 202!

“It is little known that there is a federal agency that tops the others in secrecy by a country mile. The Federal Reserve System is accountable to no one; it has no budget; it is subject to no audit; and no Congressional committee knows of, or can truly supervise, its operations. The Federal Reserve, in total control of the nation’s vital monetary system, is accountable to nobody — and this strange situation, if acknowledged at all, in invariably trumpeted as a virtue.” - Free-Market Economist Murray N. Rothbard, 1994.

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There is absolutely no reason not to perform an audit. It would simply be Congress doing its job. Maybe that is expecting too much? - http://www.megalextoria.com/politics/?x=entry:entry120801-120248

Ron Paul's legacy celebrated after House votes to audit Federal Reserve

Paul's son, Kentucky Sen. Rand Paul -- who also addressed the crowd at Catholic University on Wednesday night -- urged those assembled to email Reid's office and plead with him to call a vote on the legislation.

The lawmaker said his staff uncovered video showing Reid in the 1990s "going to town, talking about how we should audit the Fed."

"Now, you have to convince him that he still believes that," Rand Paul said. "And so one of the things you can do, if everyone in this room left here and emailed Harry Reid, I think it would help."

Ron Paul predicted that the Senate would pass the legislation if actually brought to a vote.

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http://90e4b99c.tinylinks.co

Harry Reid vows Federal Transparency Act will never be voted on in the Senate

Supporters of Rep. Ron Paul and sound monetary policy rejoiced online as they heard of the passage of H.R. 456, the Federal Transparency Act, on Wednesday. Their joy, however, was short-lived as within an hour of the bill passing word spread from the office of the Harry Reid. The Senate Majority Leader and Nevada Democrat has vowed the Federal Reserve Transparency Act will not be put to a vote in the Senate.

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Give Harry Reid a call if you want him to support an audit of the Federal Reserve: 202-224-3542 / Fax: 202-224-7327. See the article linked above for more contact information.