Not really. The government has the authority to print money. They can ensure banks never run out of cash. But it may cause inflation if they overdo it.
I suppose inflation is paying for it, but I get the feelings that the semantics around whether inflation is "paying" for things have changed recently (or maybe I've been hearing too many ardent MMT evangelists).
The ability to print money was outsourced to the Federal Reserve, while regulated by the govt it is not the govt.
When we "borrow" money from the Fed it is at interest. We have created a debt based system where everything is a borrow.
Fiat currencies are based on the value of the peoples ability to create value. When the people owe the banks more value than they can generate they are bankrupt. When the people and the govt ( the people ) owe money to the banks to the point they cannot generate enough value to cover the debts what will happen ?
Printing money was alway the job of private banking in the US. Bank notes were used in the 19th century but sucked because podunk bank’s note wasn’t accepted in NYC...the federal reserve fixed that by centralizing all bank note creation to a consortium of reserve banks.
1. Applications for membership by State banks --
Any bank incorporated by special law of any State, operating under the Code of Law for the District of Columbia, or organized under the general laws of any State or of the United States, including Morris Plan banks and other incorporated banking institutions engaged in similar business, desiring to become a member of the Federal Reserve System, may make application to the Board of Governors of the Federal Reserve System, under such rules and regulations as it may prescribe, for the right to subscribe to the stock of the Federal reserve bank organized within the district in which the applying bank is located.
I'm not sure how your quote is relevant to the statement that the Federal Reserve is part of the US government. The Federal Reserve is "independent within the government" [1] not separate from the government. There's a whole page on the Federal Reserve website's FAQ section dedicated to explaining this. Your quote seems to be about how commercial or State banks apply to become a part of the Federal reserve system.
Any natural born citizen can become a member of Congress (provided they are over 30 iirc). Does it follow then that Congress is not a part of the government because any persom can become a part of it.
A formerly private citizen now sits in the white house. Does it follow that the executive branch is not part of the government?
I cannot comprehend why the fact that non-government entities can joint a government entity makes you think the latter ceases to be part of the government.
> Any natural born citizen can become a member of Congress (provided they are over 30 iirc)
Tangentially, both the age and natural born citizen requirements are wrong; the minimum for a member of Congress are the requirements for the House, where you must be a citizen for at least 7 years, 25 years old, and an inhabitant of the State you represent.
For the Senate, the age requirement is 30 and the citizenship requirement is 9 years.
Let's get down to brass tacks. There are 0 realities in which the fed could go off and say, buy a yacht for every board member or invest in Russian spy operations - whatever the law says, they are considered by the US and operate as effectively a branch of the US government.
If you have any recorded evidence to support the argument the Fed is not in practice operated as branch of the US Government I'd be very interested ion reading it
> If you have any recorded evidence to support the argument the Fed is not in practice operated as branch of the US Government I'd be very interested ion reading it
Pedantically, it's an independent executive agency [0], not a branch (that term refers to the Executive, Legislature, and Judiciary); like other such agencies it has a governing board appointed by the President and confirmed by the Senate.
> The Federal Reserve System is not "owned" by anyone. Although parts of the Federal Reserve System share some characteristics with private-sector entities, the Federal Reserve was established to serve the public interest.
> Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund.
> That is like saying any corporation publicly traded yet regulated by the govt is now part of the govt.
Why does it have to be publicly traded? Corporations are exercises of government power by which people (who may themselves be corporations) are revocably delegated special powers created by government. They are, in a very real sense, aspects of the chartering government.
To the extent that they are permitted to serve basically unconstrained private purposes, that's not because they aren't part of the government, but because of what the hosting society believes about the proper application of government power.
No. Again I'm really not sure why you insist on saying so given the fact that the Federal Reserve saw fit to dedicate a whole FAQ section to say otherwise.
Publicly traded companies area still owned by private people and organizations. The publicly traded nature subjects them to additional oversight, but they're still private enterprises.
Where can I buy stake in the Federal reserve? What was it's stock price history?
We can't because nobody "owns" the federal reserve, just like nobody "owns" the FBI or the Navy.
A corporation with employees becomes a member of the Federal Reserve. The job is to generate money from nothing, and get paid for it.
So as a federal reserve bank you create money, charge for doing so and then you change hats from federal reserve to local private bank and loan that money to the private sector charging profits for doing so.
You charge fees coming and going get salaries for both jobs and have no exposure for doing so.
Bonus if your bank fails you are insured by the people who are borrowing money from you.
Yes, banks can join the federal reserve system and other banks can be FDIC insured. But how do you go from that to "the Federal reserve is not part of the government". It's the central bank of the United States. Its chairman is appointed by the government. All profits are paid back to the United States. Is about as independent from the government as the FBI. Saying that the Federal reserve system is not part of the government is as non-sensical as saying the FBI is not part of the government because similar degrees of independence from the executive branch exist. I get that the fact that government agencies can be independent from the executive branch is difficult to wrap one's head around but that sort of independence is not the same as "not part of the government".
> The Federal Reserve, like many other central banks, is an independent government agency but also one that is ultimately accountable to the public and the Congress.
It says right there that it is a government agency. Independent, yes, but ultimately accountable to the government. It's leadership is appointed by the government.
Now... lets say a company was allowed to buy shares in the govt and be able to act as a govt agency while remaining a private company.
So they contract themselves to do some work, pay themselves for setting up the contract, switch hats then do the work. Bonus if they don't do the job right they simply aren't liable.
Sure... But what you describe is not how the Federal Reserve works. The Federal Reserve is accountable to Congress. If they do their job poorly, leadership can be removed. The Federal Reserve is not a private company.
They don't "buy shares in the government". I'm not even sure what that even means. Nobody can buy shares in the government because the government isn't a company. I guess you might be referring to government bonds. But those aren't shares, they're contracts to get paid a greater amount when the bond reaches maturity. The whole concept of "shares of the government" is just not valid because nobody owns the government. At least not in the US, there are some monarchies where all government assets are owned by the royal family.
I suppose inflation is paying for it, but I get the feelings that the semantics around whether inflation is "paying" for things have changed recently (or maybe I've been hearing too many ardent MMT evangelists).