THE LIBERTARIAN ENTERPRISE
Number 682, August 5, 2012
"Today's politicians are sociopathic
personalities who wish to rule over others."
Special to L. Neil Smith's The Libertarian Enterprise
Mr. Ben Bernacke told the Senate Banking committee that the government must take action (deficit spending) to prevent an economic collapse. Did he tell Congress that every dollar of such spending would be profit for the Fed that would be hidden by the FRBNY in apparent violation of the law ??
A popular concept is that the government will "borrow" from the Federal Reserve. This involves giving a Treasury security (bill, bond, or note) to the Fed as collateral and the Fed will credit an account of the government in the amount of the security. The government then spends the (book-entry) funds while the Fed (theoretically) holds the collateral; i.e. deficit spending. Voila !! Additional (fiat) money has been injected into the economy of the Nation which, in the opinion of Mr. Bernacke, may stabilize the economy.
Observe that the Fed holds the collateral. When the collateral matures, government must pay the Fed to redeem the security. The fiat money spent by government must be re-acquired and paid to the Fed. But the government has already spent the money and the bank account is zero.
So the Fed can sell the collateral at the Treasury auctions (if it has not already been auctioned). If the funds went to the government, the Fed would essentially give up the security. Bankers are not known to generously give up money.
Also, if the funds went to the government, they would be used to pay off the debt of the security that had been issued and that would negate the existence of the debt and further it eliminates any inflation from the currency in circulation being increased. Since this does not happen, the funds from deficit spending cannot go to the government.
The Federal Reserve Bank of New York has the responsibility of handling all accounting and funds for Treasury auctions. The funds from deficit spending go into the FRBNY but they are not recorded as coming out. These items are not included in the ANNUAL REPORT TO CONGRESS nor are they dispensed in any government record
Receipts from the 2010 Treasury auctions totaled $8.4 trillion. $7 trillion was used to roll-over preexisting securities (without increasing the national debt) and $1.4 trillion was received from deficit spending as detailed above. That $1.4 trillion ($4 billion every day7/52) disappeared in the catacombs of the FRBNY.
Profit of the Fed legally belongs to the government. Concealment of funds belonging to the government is identified as embezzlement and subject to one year incarceration per count. Ref. 18 USC section 641. Nonpayment of monies belonging to the government is a separate crime and subject to five years incarceration. Ref. 18 USC section 1001. Anyone knowing of such an offense who "relieves, comforts or assists the offender...to prevent his apprehension, trial or punishment, is an accessory after the fact." Ref. 18 USC section 3.
Perhaps members of Congress would want to reflect on their involvement.
The Fed runs a Ponzi scheme that hides a trillion dollars a year by the FRBNY handling of funds from the Treasury auctions that legally belongs to the US government. Ref. http://www.scribd.com/doc/48194264/rip-off-by-the-Federal-Reserve-revised