Business School 101

A business school and Keynesian apologist classic is that running a deficit and accumulating a national debt is acceptable and innocuous because the largest holder of the debt is the Federal Reserve and Intragovernmental Holdings itself.

For those of you familiar with the ownership structure of the Federal Reserve, you understand that it is owned by private banks in "stock certificate form."

Who owns the Federal Reserve?

The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.

As the nation's central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government."

The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation's central banking system, are organized much like private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.

What happens when a country, corporation or person borrows money? Why they pay INTEREST of course! Rest well knowing that most of our debt is owed to the Federal Reserve, which is in turn owned by its members...therefore, any interest payments are going to the "owners" or member banks.

This is of course a controversial claim, however, we know we are not paying zero percent interest on our debt, that member banks receive a 6% dividend PER ANUM and we do not have the ability to audit the Federal Reserve's books.

Another business school classic is that printing money is irresponsible and only third world nations like Zimbabwe participate in such antiquated monetary policy. The western world has a much more clever scheme devised by simply using debt.

When one dollar is "borrowed" into circulation, it passes through the system roughly 26 times in effect, creating $26. With some creative accounting, we don't have to print, own or hold the money...we can just create it in an electronic account.

The best part of it is, the poor suckers that own those dollars don't understand why the standard of living for the middle class has gone down significantly (even though they are making slightly more money...with two sources of income...ravaged by purchasing power decreases) while over the past 30 years, the income of the top 1 percent, adjusted for inflation, doubled: the top one-tenth of 1 percent tripled, and the top one-one-hundredth quadrupled.

So what's the difference between borrowing more money into circulation and simply printing it into existence? By printing it, you don't have to pay interest. If the United States would have printed its deficits over the past 20 years it would have saved $6 trillion in interest payments.