Number of individuals are not thrilled with the workings or indeed existence of the Federal reserve. The country's central bank does, after all, set financial policy and figure out the costs of extending credit for banks. However, a bill that would authorize Congress to
audit the Fed has just approved the House of Representatives.
Readers,
The Federal Reserve doesn't "figure out the cost of extending credit for banks." Its not a cost issue at all.
The whole point of the Federal Reserve is to coordinate bank inflation and prevent banks/the banking system from causing self-inflicted destruction from monetary inflation.
Setting interest rates manipulates banks and consumers into not borrowing more, thus acting as a brake on monetary inflation.
I'll use a situation from the early 1800's to illustrate.
Banks, as they've existed since the late 1300's create money out of thin air. In the late Middle Ages/early Renaissance they issued receipts for gold deposited in their vault, but they issued more receipts than they had gold--this is how they loaned money. In the situational example of the early 1800's those gold receipts had formalized into paper currency.
Each bank issued its own paper currency--in excess of the actual deposits on hand.
Some banks--too many--issued far too much (greedy) paper currency and bank drafts (checks) beyond what they had on hand in actual deposits.
So, when Bank A makes a loan to the miller in the form of say a check, the miller puts than out-of-thin money into his Bank B. Bank B wants its money from Bank A and present that check to Bank A for payment. But, Bank A, having created too much money out of thin air too fast, cannot pay Bank B. So, Bank A collapses. Uh-oh. It turns out Bank B was also creating money out of thin air, and badly needed that money to pay off checks on its accounts being presented by Bank C, so Bank B collapses. Then Bank C....collapses.
That situation in various forms recurred from time to time up 'til (1913?) when a number of bankers got together and wrote the bill that chartered the Federal Reserve.
The whole point of the Federal Reserve is to control how fast banks create money out of thin air so they all do it more or less evenly and not enough to wreck the whole system. It prevents the collapse of the entire system in three ways. The Federal Reserve (the Fed) sets interest rates to encourage or discourage borrowing, the lending side of it being money created out of thin air. The Fed sets limits on how much banks can create out of thin air in relation to how much actual money they have on hand. And, the Fed acts as the lender of last resort. Meaning when a bank or banks are on the verge of collapse, the Fed itself can create money out of thin air and bail them out.
The Fed has been "bailing out the system" since 2008. TARP, QEI, QEII, and the current QE[SUP]Infinity[/SUP] are just massive creations of money out of thin air.
Creating money out of thin air is monetary inflation. The word
inflation formerly did not mean prices rising; it meant inflation of the supply of money. The problem with inflation of the money supply is that when you have more dollars chasing the same amount of goods and services, prices rise as people compete for the same limited supply of goods and services.
So, when you hear some sugar-coated lie like the Fed's goal is to control inflation at 2%, realize that the truth of the matter is that the Fed is not controlling inflation--its
causing it. Also, realize that the Fed doesn't work for you or me or act to protect us. Its whole reason for existence is to protect the banks.
The robbery occurs when you are late on the sequence of receiving the newly created money, by the time the money makes its way through the system to you, prices have already risen. Also, as prices rise, the buying power of money you've already saved decreases. Meaning, value is stolen from your savings while sitting in your account. All so bankers can "earn" a living.
I very much recommend you learn more about this. Two good books are
The Case for Gold aka the Minority Report of the Reagan Gold Commission. And,
Audit the Fed by Ron Paul.
