19 Reasons Why The Fed Is At The Heart Of Our Economic Problems

Authored by Michael Snyder via The Economic Collapse blog,

Most Americans have absolutely no idea how we got into the mess that we are in today. The reason why the U.S. government is 36 trillion dollars in debt and our society as a whole is 102 trillion dollars in debt is because the system is performing exactly as it was designed. We have a system that was literally designed to create colossal amounts of debt. But if you ask most Americans about this, they cannot tell you what the Federal Reserve is or why it is at the heart of our economic problems. When Americans get into discussions about the economy, most of them still blame either the Democrats or the Republicans for our rapidly growing economic problems. But the truth is that the institution with the most power over our economic system is the Federal Reserve.

So exactly what is the Federal Reserve? Most people would say that it is an agency of the federal government. But that is not entirely accurate. In fact, the Federal Reserve itself has argued in court that it is not an agency of the federal government. The truth is that the Federal Reserve is a privately-owned banking cartel that has been given a perpetual monopoly over our monetary system by the U.S. Congress. This privately-owned central bank has been destroying the value of the U.S. dollar for decades, it has run our economy into the ground, and it has driven the U.S. government to the brink of bankruptcy. The Federal Reserve operates in great secrecy and it acts as if it is not accountable to the American people. Yet the decisions that the Federal Reserve makes have a dramatic impact on the lives of every single American citizen.

If you really want to understand what is causing our economic problems, it is absolutely crucial that you understand exactly what the Federal Reserve is and how it is systematically destroying our economy. Once you understand the truth about the Federal Reserve, you will view economic issues a whole lot differently.

The following are 19 reasons why the Federal Reserve is at the heart of our economic problems…

#1 The Federal Reserve is the central pillar of our debt-based financial system.

The way our system is designed, normally no money comes into existence without more debt being created.

But this creates a huge problem, because when a new dollar is created, the interest that will be owed on that new borrowed dollar is not also created at the same time.

Therefore, the amount money that is created is not equal to the larger amount of debt that is also created.

This is a Ponzi scheme that is designed to drain wealth from the American people and transfer it to the elite.

Today, the amount of debt in our economic system is far, far, far greater than the total amount of money.

The only way to keep the game going is to create even more money which creates even more debt.

#2 The Federal Reserve and the bankers have a monopoly on the creation of this debt-based money.

In the United States today, the only people that can create money are the bankers.

You cannot create money.

You would go to jail if you tried.

Even the U.S. government is not permitted to create money.

Although the U.S. Constitution specifically gives Congress the power to create money, the U.S. Congress has relinquished that power to the Federal Reserve.

This gives the Federal Reserve an enormous amount of power.

If you pull out a dollar bill, you will notice that it says “Federal Reserve Note” right at the top.

In the financial world, a “note” is an instrument of debt.

According to Investopedia, a “note” is “a debt security obligating repayment of a loan, at a predetermined interest rate, within a defined time frame”.

So is a “Federal Reserve Note” actually a “debt security”? Investopedia says that it is…

Technically, yes, a federal reserve note is a promissory note that does not pay any interest. It is defined as such because it states that “this note is legal tender for all debts, public and private,” indicating a promise for the government and private citizens to accept and honor the note as legal tender.

Our financial system is nothing but a giant pile of debt.

Ultimately, the entire system is designed to drain our wealth and put it into the hands of the bankers.

#3 The power of money creation and debt creation is in the hands of private banks – not the government.

The Federal Reserve has claimed that it is an “entity within the government, having both public purposes and private aspects”.

That sounds so reasonable, but the truth is that the Federal Reserve is a legalized banking cartel that is privately-owned.

In fact, the Federal Reserve is about as “federal” as Federal Express is.

In defending itself against a Bloomberg request for information under the Freedom of Information Act, the Federal Reserve objected by declaring that it is “not an agency” of the U.S. government and therefore it is not subject to the Freedom of Information Act.

So if it is not a government agency, who owns the Federal Reserve?

On the official website of the Federal Reserve Bank of St. Louis, we learn that the Federal Reserve Banks “are not a part of the federal government” and that private banks “hold stock in the Federal Reserve Banks and earn dividends”…

The Federal Reserve Banks are not a part of the federal government, but they exist because of an act of Congress. Their purpose is to serve the public. So is the Fed private or public?

The answer is both. While the Board of Governors is an independent government agency, the Federal Reserve Banks are set up like private corporations. Member banks hold stock in the Federal Reserve Banks and earn dividends.

#4 The Federal Reserve itself is not a profit-making institution. Rather, it is a tool that enables others to make obscene amounts of money.

There are many that think of the Federal Reserve as an evil profit-making machine. But the truth is that the Fed itself wasn’t designed to make money. Rather, the system was set up so that others could make an obscene amount of money from all of the debt that the system creates.

If the U.S. government had been issuing debt-free money all this time, the U.S. government would likely not be spending one penny on interest payments. Instead, the U.S. government will spend over a trillion dollars just on interest on the national debt in 2025. This is money that belongs to U.S. taxpayers that is transferred to the U.S. government which in turn is transferred to wealthy international bankers and other foreign governments.

This is the magic of the Federal Reserve system. It is about getting the U.S. government enslaved to debt and using that debt to transfer trillions of dollars of our wealth into the hands of others.

As interest rates go up, this transfer of wealth is going to become even more brutal.

As you fill out your tax return this year, just keep in mind that vast quantities of our money is going to pay interest on debt that the U.S. government never needed to take on.

There are some very happy people out there that are becoming fabulously wealthy at our expense.

What a system, eh?

#5 The Federal Reserve is a perpetual debt machine.

As mentioned above, the U.S. government is enslaved to debt.

So how did it get enslaved?

Well, instead of printing up and spending the money that it needs, the U.S. government borrows it through the Federal Reserve system at interest.

In fact, as noted above, the U.S. government cannot create a single new dollar without borrowing it.

But each new dollar that the U.S. government borrows creates more than a dollar of new debt.

As a result, the government eventually has to collect more in taxes than what it has borrowed.

This phenomenon creates an endless debt spiral.

Is that not what we have in the United States today? In fact, you see this in almost every nation on Earth where a similar central banking system has been established.

Did you know that the U.S. national debt is more than 10,000 times larger than it was 100 years ago?

Back in 1910, prior to the passage of the Federal Reserve Act, the national debt was only about $2.6 billion.

Now we are more than 36 trillion dollars in debt.

The only way that the U.S. government can inject more money into the economy is by going into more debt. But when new government debt is created, the amount of money to pay the interest on that debt is not also created. In this way, it was intended by the international bankers that U.S. government debt would expand indefinitely and the U.S. money supply would also expand indefinitely. In the process, the international bankers would become insanely wealthy by lending money to the U.S. government.

However, things did not have to turn out this way.

If the Federal Reserve had never been created, and the U.S. government had been issuing debt-free currency all this time, it is entirely conceivable that we would have absolutely no federal government debt at this point.

Unfortunately, we are now trapped in a debt-based system.

The U.S. national debt simply cannot ever be paid off. U.S. government debt has been mathematically designed to expand forever, and it has become a trap from which there is no escape.

#6 The Federal Reserve system is designed to cause inflation.

As U.S. government debt expands at an exponential pace, it inevitably causes inflation.

Most Americans believe that inflation is a fact of life, but the truth is that the United States has only had a major, ongoing problem with inflation since the Federal Reserve was created back in 1913.

Sadly, the U.S. dollar has lost about 99 percent of its value since the Federal Reserve was created.

If the Federal Reserve did not exist, it is theoretically conceivable that we could have an economy with little or no inflation. Of course that would greatly depend on the discipline of our government officials (which is not very great at this point), but the sad truth is that our current system is always going to produce inflation.

Federal Reserve officials try to keep the official rate of inflation in single digit territory, but they are not always successful.

#7 The Federal Reserve has decided to play bizarre games with our money supply.

In a desperate attempt to revive the dying U.S. economy, the Federal Reserve has resorted to chucking gigantic quantities of money into the financial system.

Remember how earlier I explained that normally whenever new money is created that more debt is created?

Well, in recent years the Fed has been resorting to a trick called “quantitative easing”. What “quantitative easing” means is that the Federal Reserve zaps massive amounts of money into existence out of thin air and injects it into the financial system. This has primarily been done by purchasing large quantities of U.S. Treasuries.

But isn’t that “monetizing the debt”?

Of course it is, and it is a blatant Ponzi scheme.

However, what is even more alarming is what this is doing to our money supply.

Just look at what has happened to our monetary base since the later stages of 2008….

It was inevitable that this rapid expansion of our monetary base was going to cause horrifying inflation.

Anyone that thought otherwise was just being delusional.

Now we are in a cost of living crisis that has no end in sight, and most Americans still do not understand who is responsible.

#8 The Federal Reserve is undemocratic.

What makes the central economic planning that the Federal Reserve does different from the central economic planning that communist China does?

Sadly, there really isn’t much of a difference.

Only in our case, the central planners don’t have to answer to anyone.

President Trump cannot order the Federal Reserve to do anything.

The Federal Reserve does not have to answer to Congress either.

It has been called “our fourth branch of government”, and it is totally out of control.

#9 The Federal Reserve runs the U.S. economy.

Most Americans want to blame Joe Biden or Donald Trump or the U.S. Congress for the state of our economy.

But the truth is that it is the Federal Reserve that sets interest rates, it is the Federal Reserve that determines the size of the money supply, it is the Federal Reserve that sets the “target rate” of inflation, it is the Federal Reserve that determines if unemployment is too high or too low, and it is the Federal Reserve that watches over all of our banks.

Yes, the politicians in Washington all have things to answer for as well.

But the politicians in Washington do not have the direct power over the economy that the Federal Reserve does.

#10 The Federal Reserve favors the big banks.

Not all financial institutions are treated equally by the Fed.

The truth is that the big banks (particularly those in New York) are treated with great favor by the Federal Reserve.

During the global financial crisis, the Federal Reserve made over $9 trillion in overnight loans to major banks and large financial institutions.

Wouldn’t you like to be able to zap trillions of dollars into existence and loan it out to your friends at very favorable terms?

Sadly, most of the “help” from the Federal Reserve always seems to go to the big boys.

When “small enough to fail” banks need assistance, they are usually told to go sell themselves to one of the big banks.

#11 The worse the debt problems caused by the Federal Reserve become, the more money the IRS needs to collect from the rest of us.

If the U.S. government could issue debt-free money, it is conceivable that we would not even need the IRS. You doubt this? Well, the truth is that the United States did just fine for well over a hundred years without a national income tax. But in the same year the Federal Reserve was created, a national income tax was instituted as well. The whole idea was that the wealth of the American people would be transferred to the U.S. government by force and then transferred into the hands of the ultra-wealthy in the form of interest payments.

If the Federal Reserve was shut down, it is entirely possible that we would be able to shut down the IRS as well.

But the only way that the current system works is if massive amounts of wealth continue to be drained from the American people.

#12 The Federal Reserve creates artificial financial bubbles.

When you look back over the last several decades, you will find financial bubble after financial bubble.

So who created all of those bubbles?

It was the Federal Reserve.

The ridiculous policies of the Fed have wrought disaster after disaster and yet most of our politicians still will not even consider major changes to the Federal Reserve.

#13 The Federal Reserve is anti-free market.

In a true free market system, the marketplace would determine what interest rates are.

In a true free market system, the marketplace would determine which financial institutions survive.

In a true free market system, artificial financial bubbles would be far less likely.

But we don’t have a true free market system.

#14 The Federal Reserve tells the rest of the our banks what to do.

Most Americans don’t understand just how much power the Federal Reserve actually has over our local banks.

The Fed is the chief regulator of the banking system, and that is extremely unfortunate. The following comes from the Fed’s official website…

The Federal Reserve’s supervision activities include examinations and inspections to ensure that financial institutions operate in a safe and sound manner and comply with laws and regulations. These include an assessment of a financial institution’s risk-management systems, financial conditions, and compliance.

That paragraph makes it all sound so benign.

But the truth is that the Fed can be quite tyrannical.

For example, Fed officials once walked into one bank in Oklahoma and demanded that they take down all of the Bible verses and all of the Christmas buttons that the bank had been displaying.

#15 The people currently running the Federal Reserve pretty much have no idea what they are doing.

You may have noticed that Federal Reserve Chairman Jerome Powell has a very long track record of incompetence. Nearly every major judgment that he has made since taking over that position has been dead wrong.

If one of us could go down the street and appoint the manager of the local Dairy Queen as the Chair of the Federal Reserve, it is very doubtful that person would do a worse job than Powell has done.

#16 Even though the Federal Reserve has such extraordinary power over the financial system, the American people are not permitted to examine their books.

The Federal Reserve claims that it is regularly audited, but when some members of Congress attempted to push through a true comprehensive audit Federal Reserve officials threw a hissy fit.

The truth is that the Federal Reserve has never undergone a true comprehensive audit since it was created back in 1913.

Whenever the subject of an audit comes up, the Fed keeps repeating the mantra of how important “the independence of the Federal Reserve” is.

Sadly, Ron Paul’s proposal to audit the Federal Reserve when he was still a member of Congress ultimately failed.

Instead, a very limited examination of Fed transactions that occurred during the global financial crisis was approved.

So what did that limited examination reveal?

Well, the Federal Reserve was forced to reveal the details of 21,000 transactions stretching from December 2007 to July 2010. It turns out that the Federal Reserve was just handing out gigantic piles of nearly interest-free cash to their friends at the largest banks, financial institutions and corporations all over the globe.

Many members of Congress were absolutely stunned by these revelations.

So what would a more comprehensive audit reveal?

#17 The Federal Reserve has way too much power.

If the Federal Reserve did not exist, we would not have an unelected, unaccountable “fourth branch of government” running around that has gotten completely and totally out of control.

Today, global financial markets react instantly whenever a Fed official makes a public statement.

And when the Fed hikes interest rates or monkeys around with the money supply it has a dramatic impact on all of us.

Ron Paul once told MSNBC that he is convinced that the Federal Reserve has actually become more powerful than Congress…

“The regulations should be on the Federal Reserve. We should have transparency of the Federal Reserve. They can create trillions of dollars to bail out their friends, and we don’t even have any transparency of this. They’re more powerful than the Congress.”

#18 The Federal Reserve is dominated by Wall Street and the New York banks.

The New York representative is the only permanent member of the Federal Open Market Committee, while representatives from the other regional banks rotate. The truth is that the Federal Reserve Bank of New York has always been the most important of the regional Fed banks by a very wide margin, and in turn the Federal Reserve Bank of New York has always been heavily influenced by Wall Street and the major New York banks.

#19 The Federal Reserve has brought us to the brink of economic collapse.

If the Federal Reserve had never been created, the American people would not be so enslaved to debt.

Nobody can deny that debt is at the very core of our economic problems. U.S. consumers are drowning in debt, state and local governments are facing horrific debt problems from coast to coast, and our federal government has piled up the biggest mountain of debt in the history of the world.

We are living in an absolutely massive debt bubble, and when it bursts the world is going to experience financial chaos like it has never seen before.

Things did not have to turn out this way.

We did not have to adopt a debt-based financial system, and we did not have to allow the bankers to enslave us with debt.

But that is what happened.

Sadly, most Americans and the vast majority of our politicians are still clueless about these issues.

In 1922, Henry Ford wrote the following…

“The people must be helped to think naturally about money. They must be told what it is, and what makes it money, and what are the possible tricks of the present system which put nations and peoples under control of the few.”

Hopefully this article will help people understand our debt-based financial system a little bit better.

Until we fundamentally change our system, many of the economic and financial problems that we are currently experiencing will never go away.

The borrower is the servant of the lender, and by allowing ourselves to become enslaved to debt we have become the servants of the international banking system.

Not only that, we have also sold our children and our grandchildren into perpetual debt slavery.

Thomas Jefferson tried to warn us about this.

He believed that when the government borrows money in one generation which must be paid back by future generations it is equivalent to stealing…

And I sincerely believe, with you, 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 fact, Thomas Jefferson said that if he could add one more amendment to the U.S. Constitution it would be a ban on all government borrowing…

I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.

Where would we be today if we had chosen to listen to Thomas Jefferson?

The amount of government debt that we have racked up is a great evil. We have stolen the future away from our children and our grandchildren. We have put them in a position where they will spend the rest of their lives paying off our debts to the bankers.

We owe it to future generations to fix the problems that we have created.

That is why so many of us believe that it is time for the U.S. Congress to shut down the Federal Reserve. Our current financial system is a complete and utter failure and we need to start over.

https://www.zerohedge.com/mark...ur-economic-problems

Agreed. Shut it down.

Too many faulty premises.

The government does not have to go into debt; it just has to spend within its revenues.

The Federal Reserve is the USA's central bank although, unlike other countries' central bank, it is not a government agency.

Final sentence says we need to start over - start over how?

This sounds more like a play to change the game in order to continue fleecing the people some more.

quote:

Originally posted by Rey HRH:
Final sentence says we need to start over - start over how?

This sounds more like a play to change the game in order to continue fleecing the people some more.

Digital Dollar. This is where this is headed.

quote:

Originally posted by Jupiter:

quote:

Originally posted by Rey HRH:
Final sentence says we need to start over - start over how?

This sounds more like a play to change the game in order to continue fleecing the people some more.

Digital Dollar. This is where this is headed.

That's already a given with or without the Federal Reserve. We're pretty much there already. The next major step, I suppose, is complete obsolescence of physical money. But that's about control.

The topic of the OP is replacing the system of creating and controlling the supply of money in the economy. I don't know of any credible proposals that will address the issues of how money is created and managed along with what to do with the national debt.

Years ago I read "The Creature from Jekyll Island".
It gives you all the info. about how and who screwed us.

Yep. Me too.

quote:

I don't know of any credible proposals that will address the issues of how money is created and managed along with what to do with the national debt.

We are headed toward default and repudiation of the debt.

To fully understand The Creature from Jekyll Island, one must first study Or Read The Financial Panic of 1907. The 1907 run on banks, the intervention of J.P. Morgan pledging his own money, the inability of the US Independent treasury to infuse liquidity, and the ultimate takeover of J.P. Morgan’s US Steel (Approved by Pres. Teddy Roosevelt). TR was known as the trust busting President and was very much the enemy of the Industrial Revolution oligarchs. So much so, that TR was to be buried in the McKinley administration as the VP, a role where candidates went to politically die. TR was never supposed to be President if the industrial oligarchs had it their way, but the McKinley assassination blew up their plan. The panic of 1907 and the takeover of US Steel, led the oligarchs to meet secretly to lay the groundwork for the Federal Reserve and set us on the path we’ve been on since 1913. Fascinating time in US History with so many similar story lines and parallels between “the blob” establishment, Trump, and Elon. The heroes and villains seem all mixed up but the power and corruption hasn’t changed a bit.

Sooo....if Congress created it then Congress should be able to do away with it. Am I right? Will they ever do that?

quote:

Originally posted by Bassamatic:
Sooo....if Congress created it then Congress should be able to do away with it. Am I right? Will they ever do that?

They passed the Federal Reserve Act of 1913 which was signed into law by President Wilson, so you Congress could pass a new law to change the whole system. The question is change it into what? This is partly what the crypto markets are trying to do. The issue there is how long before the crypto markets are corrupted and hacked? We should not underestimate the future hacking ability of AI. Who sets the finite amount of Bitcoin? Why couldn’t they decide to add more? There are no easy answers to these questions and proponents on every side are blinded by emotional attachment which obscures logical objectivity. In the end this is always all about money and power.

Very interesting and informative read. Thank you for posting that, Chellim.

That article misses in a lot of ways, but the bottom line is correct that the Fed is the tool which has been used to destroy our wealth and our money.

Inflation is not an error, it is a central function of the Fed. Inflation could, in theory, be held at zero.zero by keeping the number of dollars tied to GDP. Inflation exists as a side effect. It is a symptom of more dollars than productivity.

But, by aiming for a low non-zero inflation they can systematically devalue the national debt without the populous noticing. The national debt gets paid off with devalued dollars. But inflation hurts the citizens in numerous ways. At a low level of about 3% we don't notice it much in our own lives on a daily basis. It allows DC to perpetually deficit spend.

Until the system implodes.

In theory a currency has value because people believe it will continue to hold that value for a useful period of time. Dollars created by debt are fine so long as the number of dollars is tied to productivity and there is belief the debt will be repaid.

Federal government spending is the root of the crisis. The Federal Reserve is just the tool they've created to obscure their malfeasance.

quote:

Originally posted by Bassamatic:
Sooo....if Congress created it then Congress should be able to do away with it. Am I right? Will they ever do that?

Yes, they could. But No, they won't.
The reason is simple: Congress is addicted to spending more than the revenue it takes in. The federal reserve facilitates this.

quote:

It allows DC to perpetually deficit spend.
Until the system implodes. Federal government spending is the root of the crisis.
The Federal Reserve is just the tool they've created to obscure their malfeasance.

Yes, and I think they know it's coming.
That's the problem DOGE is attempting to get a handle on. But without Congress, it's impossible to stop this run-away train.

It's most likely to implode before it's brought under control.

quote:

Originally posted by chellim1:

It's most likely to implode before it's brought under control.

There's a hypothesis that Trump is working towards a national sovereign fund of assets (e.g. gold, BitCoin) to use as collateral to borrow against. The idea is it reduces the cost of borrowing, but only to the extent of the collateral, after which it becomes much more expensive. This would help discourage deficit spending.