Discussion in 'Financial Cents' started by Seacowboys, Feb 23, 2009.

  1. Seacowboys

    Seacowboys Senior Member Founding Member

    If the Federal Reserve, an essentially private bank, has printed all this money backed by only our good faith in them, why are they not bankrupt? If I am reading this correctly, this is sort of like the "Emperor's New Clothes"? As I understand it, their only real assets are the promises of us hard-working idiots, then why are they not insolvent?
  2. SLugomist

    SLugomist Monkey++

    Isn't all the gold with the federal reserve?
  3. Cephus

    Cephus Monkey+++ Founding Member

    And the wood nymph visits me everyday !!! LMAO

    I'm thinking it's still at Ft. Knox ,could be wrong but !!!!!
  4. ozarkgoatman

    ozarkgoatman Resident goat herder

    They are not insolvent because they keep having the the teasurey print them more money, which they only pay I think about 2 cents per bill then they loan it back to .gov and to us as well for face value. Hard to go broke doing that. [dunno]

  5. SLugomist

    SLugomist Monkey++

    Nah I bet that there is NO gold at Ft. Knox. 1 nuke and poof no more gold. get my point?
  6. Cephus

    Cephus Monkey+++ Founding Member

    There probable ain't been any there since FDR took up the collection!!!![lolol]
  7. Clyde

    Clyde Jet Set Tourer Administrator Founding Member

    What are Federal Reserve notes and how are they different from United States notes?

    Federal Reserve notes are legal tender currency notes. The twelve Federal Reserve Banks issue them into circulation pursuant to the Federal Reserve Act of 1913. A commercial bank belonging to the Federal Reserve System can obtain Federal Reserve notes from the Federal Reserve Bank in its district whenever it wishes. It must pay for them in full, dollar for dollar, by drawing down its account with its district Federal Reserve Bank.

    Federal Reserve Banks obtain the notes from our Bureau of Engraving and Printing (BEP). It pays the BEP for the cost of producing the notes, which then become liabilities of the Federal Reserve Banks, and obligations of the United States Government.

    Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the Federal Reserve notes that the Bank receives. This collateral is chiefly gold certificates and United States securities. This provides backing for the note issue. The idea was that if the Congress dissolved the Federal Reserve System, the United States would take over the notes (liabilities). This would meet the requirements of Section 411, but the government would also take over the assets, which would be of equal value. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve Banks, and on the collateral specifically held against them.

    Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy.

    So, in a nutshell, A US Dollar is a Federal Reserve Note (pull one out) that is no longer backed by gold/silver, but is simply legal tender that is backed by the fact that you can buy "goods and services" with them so long as there isn't another currency allowed by your state. In other words....the FED prints the money that the .gov can not tax.....they either create it by printing or selling the debt as $$$ to some sucker that believes in the full faith and credit of the US Government
  8. Clyde

    Clyde Jet Set Tourer Administrator Founding Member

    So, the short answer is

    We have been banktrupt since 1933 when the Federal Reserve Notes became redeemable for nothing but nothing. This scheme has lasted for 75 years and is about to come undone. There a fools born and the people have stopped watching their government at work an just accepted that money is actually money when it actually has no value at all. The day of reckoning is close.
  9. ghrit

    ghrit Bad company Administrator Founding Member

    I'd say that is close. However, FRNs are backed by the goods and services for which they can be exchanged, either currently (as a medium of exchange) or in the future (as debt repayment.) Therein lays the rub. If it is generally perceived that an FRN is worth nothing (or is decreasing in value) then the amount of goods and services that they can be exchanged for will decrease in number, but NOT in value. If we accept that the value of (say) a sack of spuds is associated with so many hours of labor, it can be seen that there can be an equivalence between manhours and a sack of spuds, regardless of the number of FRNs required for the trade. The problem arises where labor hours are restricted by outside influences such as reduced demand caused by (say) a corrupted market in (say) real estate.

    Oversimplified, no doubt, and compounded by the reduction in backing that Congress has encouraged and permitted the Fed. IIRC, the requirement imposed for 100% collateral has been reduced, thus leveraging the paper backing (gold certs, metals and good faith of the gov't) by something like 100X. (Don't hold my toes to the fire on that set of numbers.) It isn't difficult to see that if collateral requirements are reduced by (say) half, the amount of FRNs in circulation can be doubled. Compound that by investment leveraging and it doesn't take long for unbacked FRN quantity to explode. And, if demand and supply twitches, the natural equality of goods and services has to follow. If the Fed encourages or allows interest rates to go other than follow normal rules by tweaking, it isn't hard to see things can go out of control. The Fed tried to control normal swings, to stabilize the s/d fluctuations by deliberatly allowing/encouraging controlled slow inflation which held for many years. It worked until Wall Street figured out how to make poor mortgages palatable to folks that were totally unable to fathom the risk. And now we know ---
  10. dragonfly

    dragonfly Monkey+++

    Not so long ago, there was an article in the 'MSM', that the U.S. had "shipped" some 200 "Metric Tons" of gold to China.....
    I got nothin'.....
    I can't even "pervert" that metric crap, to make it understandable to me!
  11. ghrit

    ghrit Bad company Administrator Founding Member

    1 ton = 2000 lbs
    1 Metric ton (tonne, used to be called a "long ton") = 1000 kilograms
    1 kilogram = pretty close to 2.2 lbs
    So a metric ton is about 2200 lbs.
    200 tonnes of soft metal is a lot of fishing sinkers.
  12. Seacowboys

    Seacowboys Senior Member Founding Member

    2205 lbs. or 1000 kg
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