You Loaned HOW MUCH?

By now, we’ve all heard about the about $750 billion bailout passed last month, but what is making news now is that Federal Reserve’s own efforts to save the banking industry. Specifically, it has been revealed that since September 14th the Fed has loaned out $2 trillion. Ponder that for a second. While the $750 bailout was kicked about back and forth between the two houses of congress and President Bush and well as both Presidential candidates weighed in on it, the Federal Reserve was loaning (i.e. making money out of nowhere) money that was far in excess of that. Who did they loan it to? They’re not telling. Bloomberg has sued the Federal Reserve under the Freedom of Information Act to see if they can get the court to force disclosure of the information. 

Let me break this down in terms we can all understand. The Federal Reserve is a privately owned institution. Who owns it? The member banks do. So the bank-owned Federal Reserve has created money out of nowhere and lent it to the banks against various form of collateral the banks provided. In essence, the Fed is merely obeying the wishes of its master, the banking industry. The American people have been convinced that the Federal Reserve works for them. In fact, most Americans believe that the Federal Reserve is part of the Federal government; it does have “Federal” in the name after all. But the Fed isn’t for the people. It is for the banks. The banks own the Fed, and the Fed is now serving them far better than anyone else could. Oh, and as for the collateral that’s been offered to the Fed for all of these loans, they’re not telling us that either. 

I’ve been studying the Fed for years, and this amazes me. Not that the Fed would do something like this, but the idea that this is allowed to go on in front of all of us and hardly anyone makes a mention of it is just astounding. And what really kills me is that all that money that the Fed is creating is the liability, not of it, but of the American taxpayer. If you write a check, then it’s your liability that your bank must make good with (ideally) the money that you have in your account. These loans that the Fed have made must be made good by everyone else. In essence, the Fed is allowed to legally counterfeit- to print up unlimited quantities of notes that are someone else’s liability. And who owns this fantastic money making machine? Not the people, but the banks. 

I guess I’d be hoping that we the people would be more incensed about all of this, but few people seem to care. In the last Presidential election, the Libertarians were the only major party to be taking about the dangers of the Federal Reserve and the fiat money system, and they got even fewer votes than Ralph Nader. The American system of government has been throughly perverted. Instead of fearing the obvious abuses of power that we are currently witnessing by the Federal Reserve, many people seem to have become seduced by the idea that Barack Obama can somehow make everything OK. This is insanity.

3 thoughts on “You Loaned HOW MUCH?”

  1. “I’ve been studying the Fed for years, and this amazes me. Not that the Fed would do something like this, but the idea that this is allowed to go on in front of all of us and hardly anyone makes a mention of it is just astounding.”

    Just a guess, but perhaps you have to study economics for years before you get it? Everything is now so complicated that it’s practically impossible to understand the ramifications of every system and its interactions on the others.

    I understand lots about the insides of computers and how to make them do what I want. I understand a decent amount about basic psychology and useful medicine. This is an above-average amount of technical knowledge to have in one brain. I imagine I could go and study economics and politics and law and I would still not understand much about how our tiny part of the globe functions. I would just be hugely in student loan debt!

    It’s clear you have an above-average amount of economic data rattling around in your forebrain. It seems to be your passion, so it makes sense you’d learn all you could about it. Most people are not above average. Half are, be definition, below average. Upon recently entering the workforce for the first time in many years, I was shocked to find out just how uneducated and uncurious “average” people are. I had been cocooned away in a world full of geeks and gamers who all seem to be quite brilliant in their own ways.

    So… while you fascinate my brain with tales from the land of economics, which I have never visited, your message is not going to percolate down to at least half the population because they are simply not interested and would not understand, anyway.

    I am not seduced by Barack Obama. I am a Socialist. I’m here to read opinions that seem counter to my own. Libertarianism and Socialism agree on many points. Both are, in general, about returning power to the people, so they can take charge of their lives and their workplaces and the fruits of their labors.

    I think I’m rambling now. Cheers!

  2. Hey Cathy,

    Economics has become my passion for the last few years. Went back to collage and the whole bit. Many people who have read my book said it really explained the seemingly complicated world of economics in terms that were easy to understand.

    And, again. Merry Christmas.


  3. Regarding Cat’s comment, and Preston’s response:

    Indeed. It was important to ensure a broad readership — namely those who are unfamiliar with economics and finance — outside of occasionally balancing their checkbook, or sometimes taking advantage of newbie-sympathetic accounting software to track their budget. So far, the response has been pretty encouraging from both camps: everyone seems to enjoy the layered, easily-accessible information punctuated with historical anecdotes and real-world comparisons. Especially those just looking to get a better sense of what in the hell’s goin’ down here, who profess very little to no prior knowledge of economics, much like yourself.

    Of course, all in all, our ultimate goal is to satisfy both markets, reaching as varied an audience as possible. (Including the gamer-geeks, with which he’s already quite a hit, actually.) There really appears to be strong interest across the board, regardless of level of education or understanding of economics. Fortunately, that tends to be an enduring trait of personal finance. Everyone cares about their pocketbook! When it comes down to the wire, a large number of the population will often-times vote that way, too, despite usual party affiliation. It was of little surprise then, that the economy played such a large role, proving a prime issue, in the last election. And also, enrollment in Finance and Accounting programmes is up for both traditional and continuing students. Even if a good chunk of the population is showing apathy and disinterest now, (though, I don’t think they really are, and admit some curiosity regarding your research) that looks about to change. It’s at least encouraging.

    Glad to see you’re enjoying the blog. Purchased the book yet? There are currently copies of the limited first edition available. The official publication is coming soon.

    Stay tuned. And tell your friends!

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