A Common Myth – The Federal Reserve Earns A Profit For Taxpayers And The Government

I see this myth cited over and over again.

When the Federal Reserve conducts its operations, it earns a profit.  After deducting their operating expenses, the Federal Reserve returns any surplus profit to the Treasury.  Hooray for the Federal Reserve!  They manage the economy, and make a profit for the government!

When the Federal Reserve monetizes the debt or buys bonds, the Federal Reserve makes a guaranteed riskless profit.  The Federal Reserve creates new money and buys bonds.  The interest on those bonds is the Federal Reserve’s “profit”.  That interest is returned to the Treasury.

There’s a huge fallacy.  It’s in the “creates new money” clause.  The Federal Reserve earns a nominal profit of $30B when buying bonds.  However, they created $1T+ of inflation when they bought those bonds.

The Federal Reserve has no cost of capital.  If the Federal Reserve wants to buy a bond, they create new money and buy the bond.  If I want to buy an asset, I have to work for that money.  The Federal Reserve creates new money whenever they buy something.

The “interest payment profit” is not real profit.  The Federal Reserve caused inflation to get that profit.

For example, suppose the Federal Reserve creates $1T in inflation, to earn a “profit” of $30B.  Superficially, the Federal Reserve turned over $30B of interest payments to the Federal government.  However, there was $1T of inflation.  The Federal government didn’t gain $30B.  There was an inflation loss of $970B.  If there was no Federal Reserve, the Federal government could have directly spent $1T, instead of getting a $30B payment from the Federal Reserve.

Where did the $970B go?  It went into the pockets of banksters.  The inflation caused by the Federal Reserve is much greater than the “profit” turned over to the government.  The difference goes to banksters.

The “benefit” of the Federal Reserve is not the $30B of “profit”.  The Federal Reserve prints new money and gives it to their bankster friends.  There is no public disclosure of who got how much.  If a bond is worth $0.5B but the Federal Reserve pays $1B, that’s a $0.5B gift to a bankster.  The real “profit” from the Federal Reserve is the ability to print money and lend it cheaply, without any public disclousre or oversight.

There is no public disclosure.  The total amount of Federal Reserve money-printing is a well-guarded secret. The Federal Reserve can give as much money as they want, to whoever they want, without telling anyone.

State comedians make a big deal out of how the Federal Reserve is “politically independent”.  What that really means is “Federal Reserve banksters can steal as much as they want, via inflation, without telling anyone, not even Congress or the President.”

Banksters earn a ton of money off a corrupt monetary system and the Federal Reserve.  With a virtually unlimited source of money, they can always lobby to block real reform.  With a virtually unlimited source of cheap debt, banksters arranged for leveraged buyouts of all the media corporations, so that all the “right” people control all the big media corporations.  Even though the Federal Reserve is evil, the mainstream media never criticizes the Federal Reserve.

I am offended every time I hear that fallacy.  “The Federal Reserve turns all surplus profit to the Federal government.  Hooray for the Federal Reserve!”  That ignores inflation.  In order to “earn” a nominal profit of $30B, the Federal Reserve causes much more than $30B of inflation.  The Federal Reserve doesn’t make money for the government and taxpayers.  The Federal Reserve costs money, in the form of inflation.  That money goes into bankster pockets, without any public disclosure of who got what.

3 Responses to A Common Myth – The Federal Reserve Earns A Profit For Taxpayers And The Government

  1. Hey Fsk, this is completely off topic from this post but I wanted to get your insight on this. I watched some of this movie tonight with Jennifer Lopez called “The Back-up Plan”, in which Lopez is a woman who, for some inexplicable reason as an attractive woman at a young age, opts for artificial insemination. She becomes pregnant by the procedure, and then meets a guy and begins a romance with him. They have the usual romantic comedy style courting scenes, filled with laughter and anecdotes, and then post-coitus she tells him she is pregnant by another man. After maybe ten seconds of his shock and initial resistance to the reality of the situation, they play some sappy music and that very night he shows up at her door and they are in bed spooning with his hand on her belly. Everything is right in the universe, because the sappy music and fade up camera shot lets us know that. For the next hour the guy goes on dates with Lopez, she throws up constantly, he positions her side sleeping pillow on the bed, and dotes after her in every way. I could write an essay on this I really could. But long story short, The guy ends up marrying her and surprise! It’s twins! lol. Jesus Christ dude. I don’t have a problem with in-vitro if there is no cold storage of embryos and it’s with a couple amongst themselves where the guy is the “donor”. What I do have a problem with is the double standard in every second of this film. Why is it politically correct for the guy to just bend over and take care of Lopez and not one but TWO babies by another man? And why did she need to get that procedure anyway, as an attractive woman at a young age? Maybe she is a pain in the ass or crazy, who knows? But that part is conveniently left out. The movie cuts in after the fact, and the only real drama in the story is whether or not the guy will make nice and “be a good guy” and stay with her. Which of course he does and it’s a nice happy ending. I am not defending guys out there who are ass holes by any means, but why do women who are ass holes get a mulligan, and support from the media and State?? Why isn’t the same standard applied across the board? I’ve worked my ass off since I was working fast food at 16, finished school, have worked in my field for 12 years and have a good career that I have earned, am a reasonably good looking guy, I think I am a good and peaceful man, and I have feelings and want a good woman to be loyal and loving to me. Why am I less deserving? Why are my feelings less important? I’m not losing sleep over it or anything, it just seems odd.

    • You need to learn some Game.

      Chateau Heartiste
      Roosh
      Red Pill Room
      Rational Male
      Dalrock

      There are plenty of others. Follow their blogrolls.

      I’m no Game expert. However, they do have some useful points. I don’t agree with every aspect of the Game blogs. As usual, it’s a mixture of good advice and bad advice.

      Some points:

      * Divorce law is biased against men. You can get married, but CHOOSE CAREFULLY. Unless your wife really respects you as the leader, you may be frivolously divorced.

      * If your wife gets pregnant via another man, you’re legally responsible for the child as if he was your own. Even after a failed paternity test, you’re still liable for the kid.

      * Women don’t need to get married. The State can support them via welfare or child support. The “advantage” of being a hardworking honest guy is taken away via the State. Why should a woman choose her partner carefully, when she can get supported via welfare?

      * Until you get married, pursue multiple women. That limits disappointment and frustration, when one of them flakes out on you.

      * Because women are promiscuous, they have an inflated sense of their own attractiveness. A ’5′ woman can get a one night stand with an ’8′. This makes her think she’s really worth an ’8′. She’ll ignore the ’5′ guys at her own level, because she thinks she can get an ’8′.

      * The Game blogs mention “negs”, which is randomized negative feedback. That is better than the wishy-washy feedback most “abused productive” men give. The correct answer is to give negative feedback when she does something negative. For example, if you try talking to a woman and she ignores you to talk to her friends, walk away.

      * Many State jobs, such as HR, social worker, and bureaucrat, enable women to have high-status jobs even though they produce nothing useful. This comes at the expense of hardworking men, who pay higher taxes to support these fake careers.

      Everyone is at least a little crazy. If there were some sane women, they would realize that the honest and hardworking men are a good deal. However, they are too crazy to realize this.

      Back to that movie, I didn’t watch it. Notice “artificial insemination” as a fnord. That gives the woman the moral high ground. If she had gotten knocked up by another guy before dating the chump, he would obviously be a loser.

      Any sane man would dump his girlfriend, once he discovered she was pregnant with another man’s child. However, that doesn’t serve the State propaganda goal.

      You’re an idiot if you get engaged to a woman who already has children. You’re spending a lot of your own money and energy on someone else’s child.

      That’s a common fnord in the mainstream media. It’s desirable to take care of other men’s children.

      We live in a society of inverted values. An honest hardworking guy is not respected in our society. Women have correctly determined that honest men are losers, and avoid them.

      Also, via the Welfare State, you already are supporting other people’s children! Women don’t need to marry you to get your wealth. They can get it via the State! Some other guy is being irresponsible and getting women pregnant, and you’re paying the bill while you’re by yourself!

      • Your blog post and reply are interesting. I have learned from you.

        What you say agrees with Ann Barnhardt.

        Search for “Permanently Disqualified From Everything Part 2″ on http://barnhardt.biz/

        Unfortunately her blog posts can’t be individually linked.

        The post starts with

        As soon as the 19th amendment was passed, men were effectively castrated, …

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