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Thread: Does the Federal Reserve charge interest on using their notes?

  1. #1

    Question Does the Federal Reserve charge interest on using their notes?

    According to Edward Flaherty (Ph.D), he says it is a myth, and has gone through debunking many myths about the Federal Reserve as just a bunch of conspiracy theories.

    http://www.geocities.com/CapitolHill...flaherty7.html
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  3. #2

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    Yes, I read his rebuttal a year ago or so.

  4. #3

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    So, is he correct?

    Is it also a myth that the income tax is used to pay off the interest to the Fed?
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  5. #4

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    if I recall, this is the guy that makes strawman arguments against G. Edward Griffin's book....to which Griffin later pointed out the fallacy (How can you claim to debunk someone's book when all your arguments you're tearing down aren't even in the book?)

  6. #5

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    Basic facts:

    New money is always either created by banks using fractional reserve banking to loan out money; by the federal reserve buying treasury bonds off the market (the fed needs to buy as much as they need to to maintain desired rates, basically the treasury creates the mandate to create the new money, and the fed must do it); loans from the federal reserve to the banks, and more recently investment banks as well.
    note: From what I understand if the fed didn't buy up treasury bonds lets say cuz they said the gov spent too much and it was too much inflation, the value of the treasury bonds would go to zip and that basically means bankruptcy. So it's the system that's corrupt and not specifically the fed board and chairmen.

    The people who get the new money first get the full value of it, then it trickles down through the economy and pushes the value of all dollars down by the time they get to the rest of us. The lower down you are in the economic food chain; the trail of new money through the economy, the more you lose at life. Basic wage earners / taxpayers / consumers are of course the bottom rung.

    So even though they don't necessarily charge YOU interest, each note initially issued comes from some sort of debt. The money actually represents debt. Not only is our currency almost literally debt, we export debt (our biggest export, by far) in the form of securities and other crazy shiz on top of treasury bonds. In the case of mortgage securitys, the bank sells your debt to foreigners. Well technically t-bonds are our debt as well. (Most)Politicians all retire wealthy they aren't sweating the rest of us

    Debt base economy = fail [unless your politically connected top 1%]
    Last edited by Malakai; 09-30-2008 at 11:21 PM.

  7. #6

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    JFK resolved the interest and printed a dollar with a red seal.


    But upon his assasination they were changed by the acting president.

  8. #7

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    I vaguely remember reading this guys reasoning as to how the FED is "nonprofit"....


    the 2 main holes in his spiel are:

    1. the FED charges a "fee" for their services and we don't really know what that amounts to because there is no actual OPEN BOOKS to audit independently (the fed has their own accounting do it---sound like Enron??)

    2. The fed system is there to PROTECT the BANKS (There's where they make the big money and the FED keeps the BIG BANKS at the top of the food chain so that they are not undermined by competition)....so claims that the CENTRAL BANK isn't predatory is like an insulator to the fact that its purpose is to Maintain the "status quo" with plenty of inside information and power in the hands of the owners/shareholders (who knowbody knows who they are exactly)
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  9. #8

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    Quote Originally Posted by speech View Post
    JFK resolved the interest and printed a dollar with a red seal.


    But upon his assasination they were changed by the acting president.
    What acting president? LBJ was immediately sworn in on the airplane that night.
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  10. #9

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    What it is, is we pay about 400-500 billion a year called the "national debt."

    This money comes from individual tax returns. This money, "not one penny" goes to gov. services, as clearly statedin ronald reagan's 1982 Grace Commission report, which was a team of over 100 people, headed by peter grace and told of reagan in other words "go find out where this tax payer money is actually going.," in which the Grace Commission found, was going to the banksters of the federal reserve in the form of the "national debt."

    The whoel thing is a fraud. We could entirely elliminate the fed and print our own money and elliminate the 400-500 billion a year we pay to these crooks. This is what Kennedy tried to do, in giving us silver....it would have given th epwoer back to the people and made the paper fed dollalr worthless (what would you rather have, a silver $ or a FRN....LOL)

    And the IRS colelcts this money, which doesn't even go to any government services according tot he grace commission report........ what a fraud! The IRS is not even a legitimate branch of the federal government. The IRS employee pay checks don't come from the us treasury. ITheir pay checks come from some offshore account I hear........

    this is the greatest fraud in all of US history, proven by the Grace Commission Report!
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  11. #10

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    Quote Originally Posted by speech View Post
    JFK resolved the interest and printed a dollar with a red seal.


    But upon his assasination they were changed by the acting president.
    spare us the conspiracy theory. JFK just wanted the printing press for himself to fund his own crap. Just because he was supposedly going to back his money with silver doesn't mean he wouldn't have cheated and printed more dollars than silver to back it. In fact, we were already doing that with gold. Every government in the history of the world has cheated with printing dollars. JFK was planning on doing the same.

  12. #11

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    A "NOTE" is a loan and a "debt instrument". http://dictionary.reference.com/browse/note

    "I wish it were possible to obtain a single amendment to our constitution - taking from the federal government their power of borrowing." - Thomas Jefferson

  13. #12

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    I can't seem to find the full Grace Commission report anywhere. Do you have a link or a way to download it?
    Ron Paul has empowered us with knowledge. Now we must overcome the next hurdle with unity. That is why we must support Bob Barr for president!

  14. #13

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    I tried to get Flaherty to debate Bill Still, the producer and narrator of 'The Money Masters'. Bill agreed to it, Flaherty didn't.
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  15. #14

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    Quote Originally Posted by nate4ron View Post
    I can't seem to find the full Grace Commission report anywhere. Do you have a link or a way to download it?
    http://www.freecanadian.net/articles/grace.html

  16. #15

  17. #16

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    Quote Originally Posted by nate4ron View Post
    According to Edward Flaherty (Ph.D), he says it is a myth, and has gone through debunking many myths about the Federal Reserve as just a bunch of conspiracy theories.

    http://www.geocities.com/CapitolHill...flaherty7.html
    Flaherty is a total fed shill.. He carefully words his arguments to sound like he is disputing "myths" but all he does is try and deceive and fool people into believing the fed is all good and benevolent.. its a crock.. i can tear apart any and all of his arguments.. as im sure plenty of others can too.

  18. #17

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    Quote Originally Posted by fj45lvr View Post
    I vaguely remember reading this guys reasoning as to how the FED is "nonprofit"....


    the 2 main holes in his spiel are:

    1. the FED charges a "fee" for their services and we don't really know what that amounts to because there is no actual OPEN BOOKS to audit independently (the fed has their own accounting do it---sound like Enron??)

    2. The fed system is there to PROTECT the BANKS (There's where they make the big money and the FED keeps the BIG BANKS at the top of the food chain so that they are not undermined by competition)....so claims that the CENTRAL BANK isn't predatory is like an insulator to the fact that its purpose is to Maintain the "status quo" with plenty of inside information and power in the hands of the owners/shareholders (who knowbody knows who they are exactly)
    Hes a douche.... The fed is definitely FOR PROFIT. So they remit PART of their interest income on govt securities back to the Treasury.. Big whoop.. once they sell it on the market (Or change accounting so its held by a member bank) guess what.. the country is paying interest.

    Every year, the fed will give back 19 or 20 billion dollars from a claimed 22-23 billion in interest income from held govt securities.. Gee, what about all the hundreds of billions they make off interest from lending out money? Who got all that money eh? I dont see them giving THAT money to the federal govt.

  19. #18

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    Oh and I forgot to mention.. Im pretty sure Flaherty and Bernanke are buddies, I think they both went to college together.. Gee, what are the odds eh????

  20. #19

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    Now after reading this link I will have to tear it apart..

    Quote Originally Posted by Flaherty
    Myth #7: The Federal Reserve charges interest on the currency we use.
    BY: Edward Flaherty, Ph.D. Department of Economics College of Charleston, S.C.

    In my experience this particular myth has alarmed more people than any other. The Federal Reserve is a bank, no? Banks do not lend money for free, right? Our currency comes into circulation only when the government borrows currency from the Fed -- at interest -- and then spends it into the economy, right?. This means we, as citizens, pay interest on the very currency that we use.

    Conspiracy theorists believe this is part of the alleged "New World Order" plot to bankrupt the United States.
    Conspiracy theorists? Now, he brings this shit up to try and mock and deride.

    What is the truth here? Does the government really pay interest on our paper money, Federal Reserve Notes? Thomas Schauf of FED-UP, Inc. circulates an information letter in which he writes:

    "Why pay interest on our currency? A typical incorrect answer is - the FED profits are returned to the U.S. Treasury. The truth is, the FED is a private bank in business for profit. We pay roughly $300 billion in interest on our artificial debt and by special agreement, the U.S. Treasury receives $20 billion in return.

    These numbers are also posted in Barrons and the WSJ. Its always approximately $20 Billion each year.

    Taxpayers lose $280 billion to the FED banking system per year ... Your local library has these dollar figures. The numbers don't lie."
    I dont know about $280 Billion exactly because the FED never gets audited, but its probably a close approximation

    5
    Schauf also argues that the Federal Reserve system is part of the international banking conspiracy, and that President Kennedy might have been assassinated because he allegedly attempted to curb the power of the Federal Reserve (See Myth #9).
    Again with the conspiracy theories.. Since he brings it up again I will mention that all 4 assassinated presidents were against private central banking. I dont know if this is *THE* reason any of them were killed and its certainly not needed to bring up and explain the facts of this system. Again Flaherty is trying to discredit.

    The currency interest issue is also raised by other conspiracy theorists. Television evangelist Pat Robertson in his book The New World Order and Jacques Jaikaran in Debt Virus make identical claims, as does the organization Americans for Better Transportation (formerly known as the Coalition to Reform Money).
    How accurate are these claims? Some of Schauf's statement is correct.

    The Treasury Department prints Federal Reserve Notes and then sells it to the Federal Reserve system for an average cost of about 4 cents per bill (see FedPoint #1).

    However, the Fed must present as collateral for the currency an amount of Treasury securities that is equivalent in value to the currency purchased.
    This makes it sound like the FED is putting up bonds of its own against this new;y printed money, which it is NOT. The government issues NEW debt and gives it to the FED in exchange for this newly created money.

    The Federal Reserve collects interest on all the Treasury securities it owns, including the ones held as collateral. This is as far into the realm of fact as Schauf's statement can take his reader.

    What Schauf does not tell his reader is that nearly all the Federal Reserve's net earnings are repaid to the Treasury. This is done per an agreement between the Board of Governors and the Treasury. Schauf says this 'typical' answer is incorrect. Shown below is the abbreviated income statements for the Federal Reserve system for 1994-97.
    This is misleading. We do not know what the FED's "NET" earnings are. We only know how much income they get from interest on treasury securities and how much they give back to the govt. Since the fed ALSO receives interest income from lending out money to banks the fact they do not include THIS number in their "NET" earnings doesnt change the fact they are receiving income from this source. This is all money taken from the people and I have no doubt it is in the hundreds of billions of dollars each year. But we'll never know exactly because we dont actually get to see their books.



  21. #20

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    MEET EDWARD FLAHERTY, CONSPIRACY POO-POOIST
    A response to a critic of The Creature from Jekyll Island
    © 2004 by G. Edward Griffin


    http://www.freedom-force.org/freedom...refpage=issues

  22. #21

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    Bump.

    So should I not repeat this Grace Commission quote?

    "100% of what is collected is absorbed solely by interest on the Federal Debt ... all individual income tax revenues are gone before one nickel is spent on the services taxpayers expect from government."

  23. #22
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    That quote is not correct. According to the US Budget for 2010 numbers on Wiki, the government collected $1.06 trillion in income taxes (which also does not include social taxes which are also income based taxes) and only $164 billion went to interest on the debt so that would be about sixteen percent of income taxes collected went to paying interest on the debt.
    http://en.wikipedia.org/wiki/2010_Un...federal_budget

    As for the original question (from a while back) the Fed does not charge the government fees for using Federal Reserve Notes. In the first place, it is the Treasury, not the Fed which prints the notes so for the physical notes, the Fed is not charging anything.

    What is true is that the Fed gets paid interest on the Treasury notes and government bonds they hold in their portfolio just as all other holders of these securities are paid (the Fed has about 5.5% of the total US Treasury debt). The Fed is profitable and receives revenue from other sources as well (interest it charges member banks to borrow for example) and after costs, they return any profits to the US Treasury so they actually make a net contribution to the Treasury- not a cost.
    Last edited by Zippyjuan; 12-04-2010 at 07:02 PM.
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  24. #23

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    Quote Originally Posted by Zippyjuan View Post
    That quote is not correct. According to the US Budget for 2010 numbers on Wiki, the government collected $1.06 trillion in income taxes (which also does not include social taxes which are also income based taxes) and only $164 billion went to interest on the debt so that would be about sixteen percent of income taxes collected went to paying interest on the debt.
    http://en.wikipedia.org/wiki/2010_Un...federal_budget

    As for the original question (from a while back) the Fed does not charge the government fees for using Federal Reserve Notes. In the first place, it is the Treasury, not the Fed which prints the notes so for the physical notes, the Fed is not charging anything.

    What is true is that the Fed gets paid interest on the Treasury notes and government bonds they hold in their portfolio just as all other holders of these securities are paid (the Fed has about 5.5% of the total US Treasury debt). The Fed is profitable and receives revenue from other sources as well (interest it charges member banks to borrow for example) and after costs,they return any profits to the US Treasury so they actually make a net contribution to the Treasury- not a cost.
    You know this is the biggest crock of shit right?

    Its like this.. Your mother gives you $20 to go down to the store to buy some milk. She says go buy something for yourself and to give her back the change.

    So you go down to 7-11 and buy a gallon of milk for mom.. But then you buy a box of donuts for yourself, a hershey bar, a magazine, a slurpee, and play a couple video games with the money,.. After all that you bring back the change for your mom.

    Thats what the fed does when it gives the money back to the treasury "after expenses"



    Really.. stop with the shilling federal reserve shit.. you are sickening. Maybe we'll get a wikilink on you that you work for the fed.
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  25. #24

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    Quote Originally Posted by Zippyjuan View Post
    and after costs,

    if by "costs" you mean "keeping just about every high-level PhD economist on the fed payroll to put forth data that supports the fed" then I agree =p

  26. #25

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    Quote Originally Posted by Truth Warrior View Post
    A "NOTE" is a loan and a "debt instrument". http://dictionary.reference.com/browse/note

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    In 2009, the money they returned to the Treasury amounted to $45 billion.
    http://www.washingtonpost.com/wp-dyn...011103892.html No other government agency gives money to the Treasury.

    Much of the higher earnings came about because of the Fed's aggressive program of buying bonds, aiming to push interest rates down across the economy and thus stimulate growth. By the end of 2009, the Fed owned $1.8 trillion in U.S. government debt and mortgage-related securities, up from $497 billion a year earlier. The interest income on those investments was a major source of Fed profits -- though that income comes with risks, as the central bank could lose money if it later sells those securities to reduce the money supply.


    The Fed also made money on its emergency loans to banks and other firms and on special programs to prop up lending, such as one that supports credit cards, auto loans, and other consumer and business lending. Those programs impose interest and fees on participants, with the aim of ensuring that the Fed does not lose money.

    And while the central bank in its most recent financial report had recorded a $3.8 billion decline in the value of loans it made in bailing out the investment bank Bear Stearns and the insurer American International Group, the Fed also logged $4.7 billion in interest payments from those loans. Further losses -- or gains -- on the two bailouts are possible as time goes by. The Fed also charges fees for operating the plumbing of the financial system, such as clearing checks and electronic payments between banks.

    From its revenue, the Fed deducts operating expenses, such as employee salaries, then returns to the Treasury almost all of the earnings that remain. The largest previous refund to the Treasury was $34.6 billion, in 2007.
    That $46 billion was off a gross income of $52.1 billion which would have left about $6 billion as "expenses". http://www.federalreserve.gov/newsev.../20100112a.htm
    Release Date: January 12, 2010

    For immediate release
    The Federal Reserve Board on Tuesday announced preliminary unaudited results indicating that the Reserve Banks provided for payments of approximately $46.1 billion of their estimated 2009 net income of $52.1 billion to the U.S. Treasury. This represents a $14.4 billion increase over the 2008 results ($31.7 billion of $35.5 billion of net income). The increase was primarily due to increased earnings on securities holdings during 2009.

    Under the Board's policy, the Reserve Banks are required to transfer their net income to the U.S. Treasury after providing for the payment of statutory dividends to member banks and equating surplus to paid-in capital. In 2009, statutory dividends totaled $1.4 billion and approximately $4.6 billion of earnings were used to equate surplus to paid-in capital.

    The Federal Reserve Banks' 2009 net earnings were derived primarily from $46.1 billion in earnings on securities acquired through open market operations (U.S. Treasury securities, government-sponsored enterprise (GSE) debt securities, and federal agency and GSE mortgage-backed securities), $5.5 billion in net earnings from consolidated limited liability companies (LLCs), which were created in response to the financial crisis, and $2.9 billion in earnings on loans extended to depository institutions, primary dealers, and others. The significant increase in earnings on securities was primarily due to increased securities holdings as a result of the Federal Reserve's response to the severe economic downturn. Net earnings from currency swap arrangements, which have been established with 14 central banks, and investments denominated in foreign currencies totaled $2.6 billion. Additional net earnings of $1.5 billion were derived primarily from fees of $0.7 billion for the provision of priced services to depository institutions.

    Operating expenses of the twelve Reserve Banks, net of amounts reimbursed by the U.S. Treasury and other entities for services the Reserve Banks provided as fiscal agents, totaled $3.4 billion in 2009. In addition, the interest paid to depository institutions on reserve balances totaled $2.2 billion. The Reserve Banks were assessed for Board expenditures, including the cost of new currency, totaling $0.9 billion.

    The preliminary results include valuation adjustments through September 30 for loans and consolidated LLCs. The final results, which will be presented in the Reserve Banks' annual financial reports and the Board of Governors' Annual Report, will reflect valuation adjustments through December 31.
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  28. #27

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    Quote Originally Posted by Zippyjuan View Post
    In 2009, the money they returned to the Treasury amounted to $45 billion.
    http://www.washingtonpost.com/wp-dyn...011103892.html No other government agency gives money to the Treasury.



    That $45 billion was off a gross income of $52.1 billion which would have left about $7 billion as "expenses". http://www.econbrowser.com/archives/...e_federal.html
    only $7 billion? Gee, for a long time they only consumed $2 Billion.. but hey thats what happens when you have a $300 million art collection with full time curator, a fleet of 47 learjets, pay your head janitor $160,000 a year, etc.. just a small smattering of the "expenses" the federal reserve incurs that are indeed paid for by the tax payer...

    Guess they need to buy more art or crap eh?
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    Perhaps you can provide us with numbers showing how much money they get from taxpayers. Is it more than the $45 billion they gave to the US Treasury last year? Thank you for looking into this. To the best of my knowledge, the Fed does not receive taxpayer money (aside from the interest all Treasury bond holders are entitled to- and again, they return most of all the money they take in to the Treasury).
    Last edited by Zippyjuan; 12-06-2010 at 03:09 AM.
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  30. #29

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    Quote Originally Posted by Zippyjuan View Post
    In 2009, the money they returned to the Treasury amounted to $45 billion.
    http://www.washingtonpost.com/wp-dyn...011103892.html No other government agency gives money to the Treasury.
    You sure formed that to sound a lot like the Federal Reserve System is a government agency. Please clarify that you didn't intend to make the Fed sound like a gov't agency.

    That $46 billion was off a gross income of $52.1 billion which would have left about $6 billion as "expenses". http://www.federalreserve.gov/newsev.../20100112a.htm
    Using the unaudited Fed's numbers to prove what the Fed claims? I didn't even click the link because I don't care what it says. Why would I trust what they claim? I just saw Ben Shalom on 60 Minutes claiming inflation was "low", that QE2 wasn't "printing money", and that he didn't see the bubble forming. He, and the rest of his cohorts, have lost all credibility. Why do you still put an ounce of faith into what they claim? I quite think they've lied and stolen enough from this country already.

    Ok so I just clicked the link anyway. What are "statutory dividends to member banks"? What statute governs that?
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  31. #30

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    Quote Originally Posted by devil21 View Post
    Ok so I just clicked the link anyway. What are "statutory dividends to member banks"? What statute governs that?
    The Federal Reserve Act, 1913

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